ED Files Case Against SIMPL for FDI Violation

New Delhi, Jul 23 (PTI) The Enforcement Directorate on Wednesday said it has registered a foreign exchange violation case against a Bengaluru-based company that offers credit payment service through a mobile app named SIMPL for alleged contravention of FDI rules to the tune of more than 913 crore.

The case pertains to the company named One Sigma Technologies Pvt. Ltd. and its director Nithya Nand Sharma. The company runs its business through its app that provides 'Buy Now Pay Later' services, including a facility for its customers to pay in installments.

"The company received FDI under automatic route and issued convertible notes under automatic route without obtaining prior approval from the Government of India and thereby contravened the provisions of the Foreign Exchange Management Act (FEMA) collectively to the tune of Rs 913,75,88,062 and rendered itself liable to be proceeded under FEMA," the federal probe agency said in a statement.

The ED said a probe was initiated against the company on the basis of "credible" information that it received a "substantial" amount of foreign direct investment (FDI) from the US, allegedly in violation of the policy.

It was learnt, the agency said, that One Sigma Technologies received FDI to the tune of Rs 648,87,76,480 and issued Convertible Notes of Rs 264,88,11,582 under 100 per cent automatic route by declaring its business activity as 'Benefits of Information Technology and other computer service activities'.

An analysis of the business model and revenue generation model of the company found that it was into business that falls under the category of financial activities.

However, as per a circular issued by RBI, FDI in financial activities not regulated by any authority is to be brought under 100 per cent approval route, it said.

In activities where government approval is necessary for receiving FDI, any startup company can issue convertible notes only with the approval of the Central government.
However, One Sigma Technologies has issued convertible notes "without obtaining" any approval from the government, the ED said.