ED files FEMA case against Myntra over Rs 1,654 crore FDI policy breach

New Delhi: The Enforcement Directorate (ED) has filed a complaint against Myntra Designs Private Limited, its associated entities, and directors for alleged violations of the Foreign Exchange Management Act (FEMA), 1999, involving foreign investment to the tune of Rs 1,654.35 crore.

The Bengaluru Zonal Office of the ED initiated the action following credible information suggesting that Myntra and its related companies were engaged in multi-brand retail trading (MBRT) under the guise of a wholesale cash-and-carry model, a violation of India’s Foreign Direct Investment (FDI) regulations.

According to the ED, Myntra Designs Private Limited received FDI exceeding Rs 1,654 crore on the basis that it operated as a wholesale business. However, investigations revealed that the company primarily sold goods to Vector E-Commerce Private Limited, which in turn sold those products directly to retail customers.

The ED pointed out that both companies are part of the same corporate group, and the arrangement was allegedly designed to circumvent FDI rules by disguising direct retail sales as business-to-business (B2B) transactions followed by retail (B2C) sales via Vector.

The agency said this structure violates FDI policy norms issued in April and October 2010, which permit no more than 25 per cent of wholesale sales to be made to group companies. Myntra, however, routed 100 per cent of its sales through Vector, constituting what the ED called a "clear breach of the law."

Based on its findings, the ED has filed a formal complaint under Section 16(3) of FEMA before the Adjudicating Authority, alleging violations of Section 6(3)(b) of FEMA and the Consolidated FDI Policy.