The Delhi High Court on Thursday ordered the government to investigate 21 e-commerce websites for possible violations of foreign direct investment laws.

While the names were not disclosed, Mint has independently ascertained the identity of the websites. All of e-commerce’s biggest names including Flipkart Ltd and Snapdeal (run by Jasper Infotech) figure in the list.

The only exception is Amazon.com Inc’s local arm, which, Mint reported on 29 October, could also be violating the law of the land.

The move is likely to roil the e-commerce ecosystem in India, and raise questions on the viability of business models that tread the grey areas in laws as well as the wisdom of investors who have pumped billions of dollars into such companies.

Justice Rajiv Sahai Endlaw, before whom the plea was brought, was informed by the government that they had already begun investigation of six e-commerce websites to establish if there was a violation of FDI policy by them.

“Instead of six, the government should expand their probe into all 21 e-commerce websites.” said Sahai Endlaw.

The investigation will help determine the nature of operation of the websites — be it B2B (business to business), B2C (business to consumer) or B2B2C (business to business to consumer).

India allows FDI in so-called marketplaces which connect buyers to sellers and provide services such as payments, promotion and delivery. Almost all Indian e-commerce websites tout themselves as marketplaces although some of them have strong and significant relationships with the biggest sellers on their platforms.

India does not allow FDI in so-called multi-brand retail, offline or online. Offline retailers have all along alleged that under the garb of being marketplaces, many e-commerce websites are selling directly to consumers.

The court was hearing a plea brought by India’s brick-and-mortar retailers through All India Footwear Manufactures and Retailers Association (AIFMRA).

While seeking parity in FDI norms, the footwear association had sought a probe into the working of various ecommerce websites offering footwear for sale and appropriate action against them for violation of FDI norms.

Over the last few years, retailers have prayed for a single FDI policy to be applicable to all.

Earlier, Retail Association of India (RAI), a body representing over 1,000 retailers including Shoppers Stop and Future Group, had in May approached the Delhi High Court seeking a level playing field between players in terms of FDI.

The court had directed the government to consider their representation and take a decision within four months.

The commerce ministry has been holding discussions with states (some of them have run into issues with e-commerce companies over tax), traditional retailers, as well as e-commerce companies to decide on definitions of terms such as marketplace, b2c, and b2b, and to also come up with consistent laws for foreign investment in retail in India. The definitions are expected shortly.

The 21 websites are:

1) www.flipkart.com

2) www.snapdeal.com

3) www.jabong.com

4) www.yepme.com

5) www.shopclues.com

6) www.homeshop18.com

7) www.zovi.com

8) www.fashionandyou.com

9) www.myntra.com

10) www.limeroad.com

11) www.fashos.com

India: Delhi court asks Centre to probe FDI violations by 21 e-commerce websites

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