Flipkart, India’s homegrown online marketplace and the biggest competitor of Amazon in the country, could be slapped with a massive fine. The Enforcement Directorate Agency, India’s finance-crime agency, has asked Walmart-owned Flipkart and its founders to explain why it shouldn’t face a penalty of $1.35 billion.

The agency is alleging violation of foreign investment laws, claims a report from Reuters which is citing three people and an agency official as its source. The unnamed official of the agency says that the case concerns an investigation into allegations that Flipkart attracted foreign investment and a related party, WS Retail, then sold goods to consumers on its shopping website, which was prohibited under law.

The development comes at a time when Flipkart is already facing regulatory issues, tougher restrictions, and antitrust investigations in India. On top of that, complaints from smaller sellers are also growing.

The notice to the company was issued last month by the agency’s office in Chennai. Along with Flipkart, its founders Sachin Bansal and Binny Bansal as well as investor Tiger Global have received the so-called “show causes” notice. It asks to explain why they should not face a fine of ₹100 billion (approximately $1.35 billion) for the lapses. They reportedly have 90 days to respond to the notice.

Commenting on this development, A Flipkart spokesperson said to Reuters that the company “is in compliance with Indian laws and regulations,” adding that the company “will cooperate with the authorities as they look at this issue pertaining to the period 2009-2015 as per their notice.”

The Enforcement Directorate in India has been investigating e-commerce giants Flipkart and Amazon for years for allegedly bypassing foreign investment laws that strictly regulate multi-brand retail and restrict such companies to operating a marketplace for sellers.

Flipkart, founded in 2007 by Sachin Bansal and Binny Bansal, was acquired by retail giant Walmart in 2018 for $16 billion. At the time, Sachin Bansal sold his stake to Walmart while Binny Bansal retained a small stake. The company raised a $3.6 billion funding round in July, valuing the Indian e-commerce giant at $37.6 billion.

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