The Enforcement Directorate (ED) has filed a complaint under the Foreign Exchange Management Act (FEMA), 1999, against e-commerce company Myntra alleging violation of FDI norms. The agency claims that Myntra Designs Private Limited and its associated companies and directors violated foreign direct investment (FDI) rules involving a massive sum of ₹1,654.35 crore.
The complaint was filed by the ED’s Bengaluru Zonal Office. According to the ED, they received credible information that Myntra and its group companies were involved in multi-brand retail trading (MBRT), even though they had claimed to operate as a “wholesale cash and carry” business. This goes against the FDI rules that were in place at the time.
As part of the probe, ED found that Myntra had declared itself as a wholesale business to attract foreign investment. It then received over ₹1,654 crore in FDI from overseas investors. However, the ED says that Myntra was mostly selling its goods to a related company named Vector E-Commerce Pvt Ltd. Vector then sold the products directly to individual customers online.
The ED pointed out that both Myntra and Vector are part of the same group, and Vector was essentially used as a middleman to make it look like business-to-business (B2B) sales were happening. In reality, it was a case of business-to-customer (B2C) selling—something that is not allowed under the wholesale FDI policy.
According to Foreign Direct Investment (FDI) policy changes made in April and October of 2010, only up to 25% of sales can be made to group companies if a business claims to be “wholesale cash and carry.” But Myntra, as per ED, was making 100% of its sales to Vector, which violates these rules.
The ED has said that Myntra and its related entities have broken Section 6(3)(b) of FEMA, 1999, and also violated the 2010 FDI policy norms.
Myntra responds
After the ED’s announcement, Myntra, which is owned by Walmart Inc., said they haven’t officially received any copy of the complaint or related documents from the authorities. “We haven’t received any notice yet,” Myntra said in a short statement quoted by Reuters. “But we are fully ready to cooperate whenever needed.”