Myntra booked under FEMA for Rs 1654.35 crore violation: ED files case against Myntra

BENGALURU: The Enforcement Directorate (ED) has registered a case against leading online fashion e-commerce company Myntra for allegedly violating foreign investment (FDI) norms. It has been found that the company has committed a violation of Rs 1654.35 crore by violating the provisions of Section 6(3) of the FEMA Act. A case has also been registered against Myntra's subsidiaries and directors. The case has been filed on a complaint under the Foreign Exchange Management Act (FEMA) (1999).

The ED has found that Myntra and its subsidiaries were carrying out multi-branded retail trade (MBRT) activities by claiming to be operating on a 'wholesale cash and carry' model. Myntra's action is against the FDI policy. The case has been registered in the Bengaluru Zonal Office based on accurate information.

It is also alleged that the company received foreign direct investment (FDI) on the pretext of wholesale trade and made direct sales to customers. The ED found that the retail sales were made through Vector E-Commerce Private Limited, which is associated with Myntra. The ED alleges that the company was doing both wholesale (B2B) and retail (B2C) simultaneously and used this mechanism to circumvent the law. According to the FDI Amendment Act of 2010, only 25 percent of the wholesale sales can be given to affiliated group companies. Myntra has violated this limit. There has been no official response from Myntra so far regarding the case.