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Key Points

The ED has charged SIMPL and its director with flouting FDI rules by raising Rs 913 crore without mandatory approvals. Investigations revealed the fintech disguised financial services as IT activities to bypass RBI norms. The company allegedly issued convertible notes and accepted foreign funds under the automatic route illegally. Authorities filed a formal complaint under FEMA’s Section 16(3) for adjudication.

Key Points: ED files Rs 913 crore FEMA case against SIMPL over FDI violations

  • ED probes SIMPL for Rs 648 crore FDI under IT guise
  • BNPL firm issued Rs 264 crore unapproved convertible notes
  • RBI mandates approval route for financial activities
  • Violations detected under FEMA’s automatic route provisions
2 min read

ED files FEMA complaint against SIMPL over Rs 913 crore FDI violation

ED accuses SIMPL and director Nitya Nand Sharma of Rs 913 crore FDI policy breach via unapproved convertible notes and automatic route misuse.

"SIMPL received FDI under automatic route without government approval, violating FEMA provisions to the tune of Rs 913 crore – Enforcement Directorate"

Bengaluru, July 23

The Enforcement Directorate's Bengaluru Zonal Office has filed a complaint against One Sigma Technologies Pvt Ltd (SIMPL) and its Director Nitya Nand Sharma for contravention of the Foreign Exchange Management Act to the tune of Rs 913 crore (Rs 913,75,88,062), an official statement said on Wednesday.

The enquiries in the matter were initiated on the basis of credible information that SIMPL has received a substantial amount of Foreign Direct Investment (FDI) from the US, allegedly in violation of the extant FDI policy, the ED statement said.

The ED investigation under the provisions of the FEMA revealed that the firm runs its business through mobile application named SIMPL. It provides Buy Now Pay Later services which allowed its customer to buy now and pay later in instalments, the ED said.

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

"During the course of investigation under FEMA, 1999, the business model and revenue generation model of M/s One Sigma Technologies Pvt Ltd were examined, and the same revealed that M/s One Sigma Technologies Pvt Ltd is into the business activities which fall under financial activities."

"However, as per circular, dated October 20, 2016, issued by the RBI, FDI in financial activities not regulated by any authority is to be brought under the 100 per cent approval route. Further, in activity where government approval is necessary for receiving FDI, any startup company can issue convertible notes only with the approval of the government of India. However, M/s One Sigma Technologies Pvt Ltd has issued convertible notes without obtaining any approval from the government of India," the ED said.

"M/s One Sigma Technologies Pvt Ltd (SIMPL) has 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 FEMA, 1999, collectively to the tune of Rs 913,75,88,062 and rendered itself liable to be proceeded under section 13 of FEMA, 1999."

"In view of the above, a complaint under section 16 (3) of FEMA, 1999 is filed before the Adjudicating Authority under FEMA," the ED added.

- IANS

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Reader Comments

P
Priya S
As someone who uses SIMPL, this is shocking! They should be more transparent about their funding sources. Hope this doesn't affect existing customers' credit lines 😟
R
Rohit P
Rs 913 crore violation is no small amount! Shows how startups are taking advantage of loopholes. Government should tighten FDI monitoring for fintech companies.
S
Sarah B
While regulations are important, I hope this doesn't scare away foreign investors. India needs FDI, but yes - it must come through proper channels. Balance is key!
K
Karthik V
Typical case of "jugaad" mentality in Indian startups. First break rules, then deal with consequences later. This damages credibility of our entire startup ecosystem.
N
Nisha Z
ED is becoming very active these days. Good to see financial irregularities being caught, but hope they're equally strict with big corporate houses too! 👏
V
Vikram M
The bigger question is - how did RBI miss this for so long? Our regulatory bodies need to be more proactive rather than reactive in such cases.

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