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HC refuses to pass interim order against ecommerce firms

21 November 2015

The Delhi High Court on Friday refused to pass any interim order against ecommerce firms like Flipkart and Amazon on violation of foreign direct investment (FDI) norms, saying it will wait for the government's report on the investigation carried out and steps taken so far against such companies.

Justice Rajiv Sahai Endlaw told the Centre, the Delhi government, the Reserve Bank of India and the Enforcement Directorate (ED) to file counter-affidavits within four weeks "detailing the steps already taken, so that if any need for further directions is felt, the same can be issued".

The court noted in its order that the respondents (the centre, Delhi government, RBI and ED) "state that out of the 21 entities (ecommerce sites) with respect to which averments have been made in the petition, six are being investigated and a decision has also been taken to investigate other entities as well...

"It is stated that all this is taking time and owing thereto, the counter affidavits have not been filed," it said, adding "It is deemed expedient that even if investigations are not complete, a counter affidavit be filed detailing the steps already taken so that if any need for further directions is felt, the same can be issued."

The order came on the plea of an association of footwear makers and retailers contending that ecommerce sites were violating FDI policy by retailing goods through the internet.

The association also sought an interim order, but the court refused saying "since only four weeks have been given, it is deemed appropriate to await the counter affidavits".

The petitioner contended that though FDI is prohibited in retail, "entities retailing goods through the internet are not being restrained from accepting foreign investment".

It had also claimed before the court that the e-commerce sites were being treated as retailers for the purpose of tax.

The court on the last date of hearing had observed that if the central and state governments were not treating e-commerce sites as retailers for FDI purposes, they cannot be treated as retailers for taxation purposes.

It was of the "prima facie" view that if governments were treating transactions by e-commerce sites as retail sale for tax purposes, how can they say these firms were not retailers for receiving FDI.

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