ED Slaps Rs 1,654 Cr FEMA Violation Complaint Against Myntra, Affiliates

The Enforcement Directorate (ED) in Bengaluru has filed a complaint against fashion marketplace Myntra and its affiliated entities for allegedly flouting foreign investment norms worth INR 1,654.35 crore under the guise of wholesale trading, in violation of the Foreign Exchange Management Act (FEMA), 1999.

The complaint, filed under Section 16(3) of FEMA, follows an investigation triggered by what the ED described as “credible information” that Myntra Designs Pvt Ltd and its group entities were engaged in Multi-Brand Retail Trade (MBRT) under the cover of 'Wholesale Cash & Carry', a potential violation of the existing FDI norms.

ED’s investigation revealed that Myntra secured foreign investment by positioning itself as a wholesale trader, but allegedly funneled the majority of its sales to Vector E-Commerce Pvt Ltd; a related party within the same corporate group which then retailed the goods to end consumers.

“Vector was created and continued to be used as a corporate entity to bifurcate the B2C (business-to-customer) transaction into B2B (Myntra to Vector) and then B2C (Vector to retail customers),” the ED alleged.

The probe found that Myntra routed 100% of its sales to Vector, flouting FEMA and the Consolidated FDI Policy which caps sales to group entities at 25%, as per the April and October 2010 amendments.

Based on these findings, the ED has filed a complaint seeking adjudication of the alleged violations.

Responding to this development, a Myntra spokesperson said they are “deeply committed to upholding all applicable laws of the land and operating with the highest standards of compliance and integrity.”

"At Myntra, we are deeply committed to upholding all applicable laws of the land and operating with the highest standards of compliance and integrity. As a homegrown marketplace, we are committed to contributing to India's nation-building efforts by empowering the textile and apparel ecosystem through digital commerce. By working closely with Indian brands and sellers, artisans, and weavers, we have helped bring traditional craftsmanship to a global audience, particularly among the Indian diaspora. In doing so, we’ve strengthened the industry’s digital backbone and created large-scale employment and entrepreneurship opportunities across the country. While we have not received a copy of the subject complaint and the supporting documents from the authorities, we remain fully committed to cooperating with them at any point of time."

Myntra is a subsidiary of Flipkart, which is owned by U.S. retail giant Walmart.