ED Files FEMA Case Against Myntra for ₹1,654 Crore FDI Violation

Myntra, Enforcement Directorate, FEMA, FDI violation, Vector E-Commerce, Flipkart, multi-brand retail, Indian e-commerce, foreign investment, ED investigation, FDI policy India, wholesale route misuse, B2B B2C violation, Section 16 FEMA, e-commerce regulations India

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The Enforcement Directorate (ED) has filed a case under the Foreign Exchange Management Act (FEMA) against fashion e-commerce major Myntra Designs Pvt. Ltd., its related companies, and directors for allegedly violating Foreign Direct Investment (FDI) rules to the tune of Rs 1,654.35 crore.

Key Allegations

Multi-Brand Retail Via Wholesale Route: ED alleges that Myntra, a Flipkart-owned company, received FDI while claiming to operate as a “wholesale cash & carry” business. However, investigators say the company actually conducted multi-brand retail trading (MBRT), which is restricted under FDI policy.

Sales Through Related Entity: Most goods were reportedly sold to Vector E-Commerce Pvt. Ltd., a company within the Myntra group. Vector would then sell these goods directly to consumers, effectively masking retail (B2C) sales as wholesale (B2B) transactions.

Violation of FDI Policy: As per India’s FDI policy (amendments dated April 1, 2010 and October 1, 2010), only 25% of sales are permitted to companies in the same group. ED claims Myntra sold almost 100% of its goods to Vector, violating this limit.

Purposeful Structuring: Investigators say Vector E-Commerce was set up to bypass FDI restrictions in multi-brand retail. This allowed foreign investment approval for wholesale operations, but the actual business was direct retail to consumers.

Timeline and Investigation

  • The case was filed by ED’s Bengaluru Zonal Office after “credible information” indicated these alleged violations.
  • Section 16(3) of FEMA has been invoked, under which the ED can seek monetary penalties or further actions for the contraventions.
  • The investigation follows broader ED scrutiny of Indian e-commerce firms regarding their compliance with FDI norms.

Myntra’s Response

In an official statement, Myntra said it “remains fully committed to cooperating with authorities” and has not yet received a copy of the complaint or supporting documents. The company emphasized its commitment to following the law and supporting India’s digital commerce ecosystem.

Industry Impact

This case highlights the increasing regulatory focus on e-commerce platforms in India, many of which are backed by foreign investment. The outcome of the ED investigation could have wide implications for how such companies structure their business models to comply with FDI norms.

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