ED files FEMA case against Myntra, directors for ₹1,654-crore FDI violation

E-commerce platform Myntra, along with its associated entities and directors, is currently under investigation following allegations of engaging in multi-brand retail trading (MBRT) while purportedly operating as a “Wholesale Cash & Carry” business. This alleged activity involves the attraction and receipt of over ₹1,654 crore in Foreign Direct Investment (FDI). On Wednesday, July 23, the Enforcement Directorate (ED) formally announced the registration of a case under the Foreign Exchange Management Act (FEMA) against Myntra, its linked companies, and directors, citing FDI “contravention” amounting to more than ₹1,654 crore.

The ED’s investigation, conducted under the provisions of FEMA, 1999, indicates that Myntra Designs Pvt. Ltd. declared its business model as wholesale cash & carry. Subsequently, the company allegedly invited and received FDI totaling ₹1,654,35,08,981 from foreign investors. A significant portion of their goods were reportedly sold to M/s. Vector E-Commerce Pvt. Ltd., which then retailed these products to end consumers, according to an ED release dated July 23. The case was initiated following credible information suggesting that Myntra Designs Private Limited, supported by Flipkart and operating under the Myntra brand, along with its related companies, were conducting MBRT while claiming to operate a wholesale cash and carry business, allegedly violating existing FDI guidelines, according to the ED. The ED’s investigation further suggests that Myntra Designs Pvt. Ltd. was essentially involved in multi-brand retail trading under the guise of wholesale operations. The agency contends that Myntra Designs Pvt. Ltd. and associated parties contravened Section 6(3)(b) of the Foreign Exchange Management Act, 1999, along with the Consolidated FDI Policy stipulations dated April 1, 2010, and October 1, 2010, to the tune of ₹1,654,35,08,981.

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