The Enforcement Directorate (ED) has filed a case under the Foreign Exchange Management Act (FEMA) against Myntra Designs Private Limited, its associated companies, and directors for allegedly violating Foreign Direct Investment (FDI) rules. The total value of the alleged contravention is over ₹1,654 crore.
Alleged Multi-Brand Retail in Disguise
The ED stated that Myntra and related entities engaged in multi-brand retail trading while operating under the cover of wholesale cash and carry business, which is not permitted under existing FDI norms. This practice, according to the ED, is in violation of guidelines laid out in the FDI policy.
Violation of Wholesale Trading Norms
As per FEMA and FDI rules, only 25% of sales are permitted to group companies under wholesale/cash and carry trading. However, Myntra Designs allegedly made 100% of its sales to Vector E-Commerce Pvt. Ltd., a linked entity, which breaches the amendments made to the FDI policy on April 1, 2010, and October 1, 2010.
FEMA Section Cited in Complaint
The case has been filed under Section 16(3) of FEMA. The ED also cited contraventions under Section 6(3)(b) of the Foreign Exchange Management Act, 1999. The alleged violation amounts to ₹1,654.35 crore according to the agency.
Myntra’s Bengaluru Headquarters Under Scrutiny
The registered case involves Myntra, which is headquartered in Bengaluru, along with other linked companies and their directors. The federal agency claimed to have received credible information before initiating the case.
Previous Investigations on E-Commerce Platforms
This action follows earlier ED probes into e-commerce platforms, including Amazon and Flipkart. Last year, searches were conducted at 19 locations including Delhi, Bengaluru, Mumbai, Hyderabad, and Panchkula targeting vendors linked with these platforms for suspected FEMA and FDI rule violations.
Civil Nature of Violations
The ED clarified that FEMA violations are generally considered civil offences, which result in monetary penalties rather than criminal prosecution. However, the scale of the current case has brought significant regulatory attention.
