Myntra Booked by ED Over Rs 1,654 Crore FDI Violation Case
The ED highlights that Vector was used as a corporate mechanism to split a retail transaction into two parts: a B2B transaction from Myntra to Vector and a B2C transaction from Vector to the retail customer.
In a significant action, the Enforcement Directorate (ED) has registered a case under the Foreign Exchange Management Act (FEMA) against Myntra Designs Private Limited, its related companies, and directors for alleged violations of Foreign Direct Investment (FDI) norms amounting to Rs 1,654.35 crore. The case revolves around accusations that Myntra, backed by Flipkart, misused the...
In a significant action, the Enforcement Directorate (ED) has registered a case under the Foreign Exchange Management Act (FEMA) against Myntra Designs Private Limited, its related companies, and directors for alleged violations of Foreign Direct Investment (FDI) norms amounting to Rs 1,654.35 crore. The case revolves around accusations that Myntra, backed by Flipkart, misused the wholesale cash-and-carry route to conduct multi-brand retail trading, a direct violation of India’s FDI policy.
According to the ED, Myntra had declared itself as engaged in wholesale cash-and-carry trading and raised foreign investments accordingly. However, inquiry revealed that the company sold its entire goods to a related entity, Vector E-Commerce Pvt Ltd, which then retailed the products to consumers. This arrangement effectively disguised multi-brand retail trade under the guise of wholesale operations, contravening the FDI policy amendments dated April 1, 2010, and October 1, 2010, which allow only up to 25% of wholesale sales to group companies. Myntra allegedly routed 100% of its sales to Vector, breaching these provisions and Section 6(3)(b) of FEMA.
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The ED highlights that Vector was used as a corporate mechanism to split a retail transaction into two parts: a B2B transaction from Myntra to Vector and a B2C transaction from Vector to the retail customer. This structure was allegedly employed to evade the FDI restrictions imposed on multi-brand retail trading, thereby raising serious concerns over compliance, transparency, and regulatory adherence in the e-commerce sector.
Myntra, headquartered in Bengaluru and a major player in India’s online fashion retail market, has stated it has not yet received the official complaint details but assured full cooperation with the investigation authorities.
This probe is part of a larger regulatory clampdown on e-commerce companies backed by foreign investment, reflecting heightened scrutiny of complex business structures used to circumvent FDI rules in India’s evolving digital economy. The ED’s firm stance under FEMA aims to uphold fair trading practices and safeguard India’s economic interests by ensuring strict compliance with foreign investment norms.
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The case also names Myntra’s directors, signaling potential personal liabilities as investigations progress. Stakeholders and market watchers are closely monitoring developments, which could set precedents for future regulatory enforcement in the sector.
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