Myntra Under ED Scanner for FDI Violation, Retail Sales Disguised as Wholesale

The Enforcement Directorate on Wednesday filed a complaint against ecommerce major Myntra Designs Private Limited, its other entities, and their directors for alleged violations of over Rs 1,654 crore. The case has been registered under Section 16(3) of the Foreign Exchange Management Act (FEMA).

The federal agency, as quoted by PTI, stated that that Myntra and associated entities carried out “Multi-Brand Retail Trade” operations. However, it falsely claimed that the Flipkart-backed platform is being operated as “Wholesale Cash & Carry” businesses.

This alleged misrepresentation is in direct violation of the FDI policy, which restricts foreign investment in MBRT under certain conditions. ED also claimed that it received “credible” information regarding the FEMA case.

"ED investigation under the provisions of FEMA, 1999 revealed that M/s. Myntra Designs Pvt. Ltd. had declared that they were engaged in the business of wholesale cash & carry and invited and received FDI from foreign investors equivalent to Rs 1654,35,08,981/- and that they sold majority of their goods to M/s. Vector E-Commerce Pvt. Ltd. (who sold the goods in retail to the ultimate customer)," the statement read.

As per the current policy, online marketplaces like Flipkart, Amazon, and Myntra are not allowed to own inventory, rather they must only act as intermediaries.

The directorate further stated that Myntra allegedly routed the majority of its sales through M/s Vector E-Commerce Pvt Ltd., a different company belongs to the same corporate group. It then sold goods directly to end customers, the agency added.

The agency also alleged that Vector was intentionally established to disguise retail (B2C) transactions as wholesale (B2B) dealings on record, allowing it to circumvent FDI regulations governing multi-brand retail branding.

"Myntra Designs Pvt. Ltd. and others have contravened the provisions as per section 6(3)(b) of the Foreign Exchange Management Act, 1999 and Consolidated FDI Policy dated 01.04.2010 and Consolidated FDI Policy dated 01.10.2010 to the tune of Rs. 1654,35,08,981...," the statement added.