Walmart’s Flipkart and its founders explain why they shouldn’t face a penalty of $1.35 billion for alleged violation of foreign investment laws, three sources and an agency official told Reuters.

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

The Enforcement Directorate official, who declined to be named, said the case concerned an investigation into allegations that Flipkart attracted foreign investment. A related party, WS Retail, then sold goods to consumers on its shopping website, which was prohibited under law.

A so-called “show cause notice” was issued in early July by the agency’s office in the southern city of Chennai to Flipkart, its founders Sachin Bansal and Binny Bansal, as well as current investor Tiger Global, to explain why they should not face a fine of 100 billion rupees ($1.35 billion) for the lapses, said the agency official and the sources. They are all familiar with the content of the notice.

A Flipkart spokesperson said the company is “in compliance with Indian laws and regulations”.
“We will cooperate with the authorities as they look at this issue about the period 2009-2015 as per their notice,” the spokesperson added.

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The Indian agency does not make public such notices issued to parties during an investigation.
One of the sources said Flipkart and others have around 90 days to respond to the information. WS Retail ceased operations at the end of 2015, the person added.