Myntra under ED scanner for alleged ₹1,654 crore FDI violation

Fashion e-commerce giant Myntra has come under the scanner of the Enforcement Directorate (ED) for alleged violations of Foreign Direct Investment (FDI) provisions amounting to ₹1,654.35 crore. The probe agency's Bengaluru Zonal Office has registered a case against Myntra Designs Pvt. Ltd., its associated companies, and directors, based on credible inputs suggesting the company engaged in Multi-Brand Retail Trading (MBRT) while misrepresenting itself as operating under a 'Wholesale Cash & Carry' model. This business structure, the ED alleges, directly contravenes India's stringent FDI policy.

Investigations conducted by the ED reveal that Myntra received substantial FDI on the pretext of running a wholesale business. However, a significant portion — reportedly 100% — of the goods were exclusively sold to M/s Vector E-Commerce Pvt. Ltd., a related company within the same corporate group. Vector E-Commerce subsequently retailed these goods directly to end consumers. The ED has concluded that this arrangement was a deliberate strategy to bifurcate direct Business-to-Consumer (B2C) transactions into a Business-to-Business (B2B) model between Myntra and Vector, followed by a B2C sale, thereby bypassing critical FDI restrictions on multi-brand retail.

Furthermore, the probe agency highlighted a specific breach of FDI policy amendments from 2010, which permit wholesale model companies to sell only up to 25% of their goods to related group companies. Myntra's alleged 100% sales to Vector E-Commerce directly violated this limit. Consequently, the ED has determined that Myntra Designs Pvt. Ltd. and others contravened Section 6(3)(b) of the Foreign Exchange Management Act (FEMA), 1999, along with relevant provisions of the Consolidated FDI Policy. A formal complaint has been filed under Section 16(3) of FEMA for further legal action, intensifying regulatory scrutiny on the e-commerce sector's compliance with FDI norms. Myntra has not yet issued a statement on the matter.