CaratLane contests ED notice on alleged FEMA violation
CaratLane Trading, now majority owned by the Tata Group’s Titan, has challenged a show-cause notice (SCN) from the Directorate of Enforcement (ED) alleging that it had violated rules between 2011 and 2014 by receiving foreign direct investment (FDI), said people with knowledge of the matter.
This predates Titan’s investment in CaratLane. Titan said recently it’s raising its stake in CaratLane to 98.28% by acquiring 27.2% more from founder Mithun Sacheti and his family.
The ED accused CaratLane of violating the Foreign Exchange Management Act (FEMA).
The notice served on March 28, 2022, stated that FDI was not allowed in single-brand retail at the time. The notice has not been made public till now.
CaratLane approached a former chief justice of India who opined that it was not in violation of FEMA since it applied to the B2B sector and not retail trade.
“Based on the legal opinion and assessment of the transactions for the years under consideration, CaratLane management believes no provisioning is required,” according to Titan's FY23 balance sheet.
Titan did not comment.
Sources told ET that the case is before the adjudicating authority, pending orders.
“The IO (investigation officer) has submitted his complaint and has detailed… the violations,” said one of them.
“Since the matter is sensitive, it is being heard by the special director. The company has contested the allegations and claims that there isn’t a FEMA case as made out by the ED.”
As per procedure, a show-cause notice is issued by an adjudicating authority (AA) — an ED officer — to the firm and its representatives after studying the complaint submitted by the investigation officer (IO).
