The Enforcement Directorate (ED) has filed regular proceedings against Myntra Designs Private Limited, its related companies, and directors, for egregious breaches under the Foreign Exchange Management Act (FEMA), 1999.
The ED's Bengaluru Zonal Office has confirmed in a statement issued on Wednesday that it has moved a complaint for the alleged abuse of channels of foreign investment to the tune of ₹1,654.35 crore.
The probe was initiated based on credible information that Myntra, purporting to be running a wholesale cash-and-carry operation, was actually allegedly engaging in multi-brand retail trading (MBRT) — a sector prohibited under Indian foreign investment regulations.
The ED claims that the company attracted foreign direct investment (FDI) worth over ₹1,654 crore on the false pretence of conducting wholesale business. But more probing had shown that most of the products were routed to Vector E-Commerce Private Limited, which then distributed them directly to small retail customers.
Most importantly, both Myntra and Vector belong to the same corporate group—a fact that triggered alarm among investigators. The ED argues that the organizational structure was specifically designed to avoid India's FDI policies through a camouflage of retail sales as business-to-business (B2B) transactions which later evolved into business-to-consumer (B2C) through Vector.
The agency pointed out that this model categorically violated FDI regulations released in April and October of 2010, which state that not more than 25% of wholesaling transactions should be executed to group companies. Myntra supposedly distributed 100% of its products to Vector, thus violating these provisions in the most categorical manner.
Following its conclusions, the ED has filed a formal complaint under Section 16(3) of FEMA, 1999 before the authority designated Adjudicating Authority. The agency charges the concerned parties with violating Section 6(3)(b) of FEMA and the Consolidated FDI Policy, resulting in foreign exchange contraventions amounting to ₹1,654.35 crore.
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