CaratLane contests the ED's notice about a purported FEMA breach

23 Aug 2023 , 02:05 PM

According to news reports, CaratLane Trading, which is now majority owned by Titan of the Tata Group, has disputed a show-cause notice (SCN) from the Directorate of Enforcement (ED) that claimed the company had broken the law by accepting foreign direct investment (FDI) between 2011 and 2014.

Titan’s stake in CaratLane came before this. Titan recently announced that it was increasing its ownership of CaratLane to 98.28% by purchasing an additional 27.2% from the company’s founder Mithun Sacheti and his family.

CaratLane was charged by the ED with breaking the Foreign Exchange Management Act (FEMA). The notice dated March 28, 2022 indicated that FDI was not permitted at the time in single-brand retail. The warning has only just been made public.

CaratLane consulted a former chief justice of India who claimed that because FEMA only pertained to the B2B sector and not retail trade, it was not in violation.

According to Titan’s FY23 balance report, ‘Based on the legal opinion and assessment of the transactions for the years under consideration, CaratLane management believes no provisioning is required.’

After reviewing the complaint provided by the investigation officer (IO), an adjudicating authority (AA) – an ED officer — issues a show-cause notice to the company and its personnel. The AA then requests a response to the accusations made.

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