It's Confirmed! Byju's Neck Is In ED's Hands Over FEMA Violations

Within hours of the news breaking that the edtech company Byju’s had purportedly received a notice from the Enforcement Directorate (ED), and despite the company's initial denial of receiving any notice from the law enforcement agency, the ED confirmed issuing a show cause notice to the prominent edtech company Think and Learn Private Limited, commonly known as Byju's, and its founder, Byju Raveendran.

Adjudicating Authority issues show cause notices to M/s. Think & Learn Private Limited and Byju Raveendran for violation involving an amount of Rs. 9362.35 Crore under FEMA, 1999

— ED (@dir_ed) November 21, 2023

This move comes in the wake of a FEMA (Foreign Exchange Management Act) violation case. The controversy intensified when reports emerged in the media suggesting that the ED had issued a show-cause notice to Think and Learn Pvt Ltd and Byju Raveendran for alleged violations amounting to Rs 9,000 crore.

However, the company swiftly had issued a denial, stating that it had not received any notice from the Enforcement Directorate.

pic.twitter.com/6fWEQUd7X1

— BYJU'S (@BYJUS) November 21, 2023

Allegations of FEMA Violations and ED's Statement

The ED alleges that Think and Learn Private Limited and Byju Raveendran have violated FEMA provisions by failing to submit necessary documents related to imports, realizing proceeds of exports made outside India, delayed filing of documents against Foreign Direct Investment (FDI), and not allotting shares against FDI received into the company. The agency emphasized these contraventions amounting to a staggering Rs 9,362.35 crore.

“...By failing to submit documents of imports against advance remittances made outside India, by failing to realize proceeds of exports made outside India, by delayed filing of documents against the Foreign Direct Investment (FDI) received into the company, by failing to file documents against the remittances made by the company outside India and by failing to allot shares against FDI received into the company,” the ED added.

It also added that the complaint was filed by the ED with respect to the contraventions of the provisions of FEMA, 1999 to the tune of Rs 9,362.35 crore.

The law enforcement agency further elaborated, in a statement, that it had initiated an investigation on the basis of various complaints regarding the foreign investment received by the company.

“The company was also stated to have made significant foreign remittances outside India and investments abroad which were allegedly in contravention of provisions of FEMA, 1999 and caused loss of revenue to the Government of India,” the ED added.

Initiation of Investigation

The ED disclosed that it initiated an investigation based on multiple complaints regarding foreign investments received by the company. The complaints suggested significant foreign remittances outside India and investments abroad, allegedly in contravention of FEMA provisions, causing a loss of revenue to the Government of India.

“The company was also stated to have made significant foreign remittances outside India and investments abroad which were allegedly in contravention of provisions of FEMA, 1999 and caused loss of revenue to the Government of India,” the ED added.

In the statement today, the agency added that it had seized documents pertaining to all investments received by the company, including overseas investments.

Previous ED Actions

This recent notice follows earlier actions by the ED in April when it conducted searches at three premises in Bengaluru related to Byju Raveendran and his company under FEMA provisions. During the searches, the ED claimed to have seized incriminating documents and digital data. The agency asserted that these documents included information about all investments received by the company, both domestic and overseas.

Calming the Storm: Byju Raveendran Assures Shareholders of FEMA Compliance

Before ED confirmed sending show-cause notice to the edtech, Byju Raveendran had assured shareholders that BYJU'S has consistently adhered to FEMA regulations and emphasized the company's commitment to compliance.

The enforcement action against Byju's and its founder comes at a critical juncture for the edtech giant, which has been a prominent player in India's education technology sector. As the investigation unfolds, stakeholders closely watch the developments, and the company's compliance with FEMA regulations remains under scrutiny. This incident also raises broader questions about regulatory oversight in the rapidly evolving landscape of the edtech industry.

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