FEMA Case Against Myntra: The Enforcement Directorate (ED) said Wednesday that it has filed a complaint against Myntra Designs Private Limited (Myntra), its affiliated companies, and its directors under the Foreign Exchange Management Act (FEMA), 1999, alleging FDI violations totaling Rs 1,654.35 crore.
The Enforcement Directorate’s Bengaluru Zonal Office acted on reliable information that Myntra and its affiliated companies were conducting Multi-Brand Retail Trade (MBRT) under the pretext of operating “wholesale cash & carry” businesses. This practice allegedly violated the existing Foreign Direct Investment (FDI) policy. According to the ED’s investigation under FEMA, 1999, Myntra Designs Pvt Ltd declared itself as a wholesale cash & carry operator. It invited and received foreign investment amounting to ₹1,654.35 crore. The company sold most of its goods to Vector E-Commerce Pvt Ltd, which then sold them in retail to end consumers.
The ED stated that Vector E-Commerce Pvt Ltd and Myntra Designs Pvt Ltd are related parties. Both belong to the same group of companies. The agency added that Vector E-Commerce was specifically established and used as a corporate vehicle. Its purpose was to split retail sales into two layers, first as a business-to-business (B2B) transaction from Myntra to Vector, and then as a business-to-consumer (B2C) sale from Vector to the final buyer. The ED concluded that Myntra Designs Pvt Ltd was effectively engaged in multi-brand retail trade while disguising its operations as wholesale activity.
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The Enforcement Directorate (ED) stated that Myntra Designs Pvt Ltd violated the conditions for “wholesale cash and carry trading.” The company made 100% of its sales to Vector E-Commerce Pvt Ltd, which directly contravenes the FDI policy amendments issued on April 1 and October 1, 2010. These amendments allowed only up to 25% of sales to companies within the same group.
The ED confirmed that Myntra Designs Pvt Ltd and others breached Section 6(3)(b) of the Foreign Exchange Management Act, 1999. They also violated the Consolidated FDI Policies of 2010 involving foreign investment worth ₹1,654.35 crore.
Myntra Response to the Case:
Myntra, a subsidiary of Walmart Inc., responded to the ED action with a brief comment. The company told Reuters, “We have not received a copy of the subject complaint and the supporting documents from the authorities.” It added, “We remain fully committed to cooperating with them at any point in time.”
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