ED Slaps Myntra With FEMA Case Over Rs 1,654 Crore FDI Violation

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New Delhi: The Enforcement Directorate (ED) has filed a formal complaint against Myntra Designs Pvt. Ltd., its group companies, and their directors for allegedly violating foreign exchange rules. According to the ED's Bengaluru Zonal Office, the company is accused of receiving illegal foreign investments worth ₹1,654.35 crore, breaching provisions under the Foreign Exchange Management Act (FEMA), 1999.

As per an official statement, the ED began its investigation after receiving credible information that Myntra and its related companies were involved in multi-brand retail trading (MBRT), even though they claimed to be running a wholesale cash-and-carry business.

This setup, the ED said, is in direct violation of India’s Foreign Direct Investment (FDI) policy. The ED’s investigation revealed that Myntra Designs Private Limited had received foreign direct investment worth over Rs 1,654 crore by declaring that it was involved in wholesale business.

However, the agency found that the company sold most of its goods to another firm -- Vector E-Commerce Private Limited -- which then sold those goods directly to retail customers. What raised concerns, the ED noted, is that both Myntra Designs and Vector E-Commerce belong to the same group of companies.

The structure was allegedly created to bypass FDI rules by disguising direct retail sales as business-to-business (B2B) transactions followed by retail (B2C) sales through Vector. The ED added that Myntra’s operations violated the FDI rules introduced in April and October of 2010, which clearly state that only up to 25 per cent of wholesale sales can be made to group companies.

Myntra, however, made 100 per cent of its sales to Vector, which the ED claims is a clear breach of the law. Based on these findings, the ED has filed a complaint under Section 16(3) of FEMA, 1999 before the Adjudicating Authority. The agency alleges that the companies involved have violated Section 6(3)(b) of FEMA and the Consolidated FDI Policy guidelines to the tune of Rs 1,654.35 crore. (With IANS Inputs)