Wal-Mart probe: No formal govt order; RBI has no powers

For Wal-Mart, controversies are a part of its business. In India too, it is not different.

The world's largest retail chain is facing allegations of illegally investing in multi-brand retail here much before the government allowed such investments.

A Financial Times report said the government has asked the Reserve Bank of India to investigate the company's investment in Bharti Walmart Holdings.

The accusation that the investment was done "clandestinely and illegally" was made by a member of Parliament from Kerala, MP Achuthan, affiliated to the Communist Party of India (Marxist) in a letter sent to Prime Minister Manmohan Singh. The investment was worth $100 million and was done in 2010, he said.

But government officials have denied any formal probe order being given to the RBI.

The government has not ordered a probe into Wal-Mart Stores over accusations the US retailer violated foreign ownership rules, a Reuters report said quoting officials on Thursday.

A Financial Times report said the government has asked the Reserve Bank of India to investigate the company's investment in Bharti Walmart Holdings. Reuters

"Every letter that comes from an MP is routinely forwarded to the department concerned for examination. We did not order a probe. We got a letter from an MP and in due course we forwarded it to the department concerned," the report quoted Pankaj Pachauri, a spokesman for the office of the Prime Minister as saying.

An RBI spokeswoman told Reuters the central bank does not have investigative powers. It can look into the transaction for any illegality. It is for the enforcement directorate to probe any such deal.

Achuthan also told Reuters he had not been told by the government that any investigation had been ordered.

Wal-Mart, which is expected to open its first Indian store after a change to ownership rules, said it had not been contacted on the subject by Indian authorities.

A Ministry of Commerce and Industry official, who declined to be identified, told Reuters the ministry had forwarded the complaint on October 10 to the RBI for examination, but said the ministry had not asked for a formal probe into the matter.

A Wal-Mart spokeswoman in India, who declined to be named, said the company had not been contacted by the ministry or the central bank and was in full compliance with India's foreign direct investment laws.

"All procedures and processes have been duly followed and details filed with relevant Indian government authorities, including the Reserve Bank of India," the US-based retailer said in a statement.

India recently allowed foreign retailers to own up to 51 percent in supermarkets, a decision made in the face of fierce political opposition. Previously, Wal-Mart and other foreign players were only allowed to own wholesale operations.

Wal-Mart was the most vocal advocate for the rule change and is expected to open its first retail store within 18 months.

The member of parliament from Kerala, MP Achuthan, whose party opposes foreign direct investment in retail, accused Wal-Mart of investing $100 million as early as early 2010 in a multibrand retail business.

In September, Achuthan had questioned Wal-Mart's role in Easyday stores, which are controlled by Bharti Enterprises, its partner in a wholesale joint venture.

The commerce minister answered that Wal-Mart Mauritius(4) Holdings Co Ltd held debentures that are convertible into a 49 percent equity stake in Cedar Support Services, the company previously known as Bharti Retail Holdings that holds Easyday.

With inputs from Reuters

Updated Date: Dec 20, 2014 12:54 PM

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