ED Files Rs 1,645 Crore FEMA Violation Complaint Against Myntra and Directors: What You Need to Know

The Enforcement Directorate (ED) has filed a formal complaint under Section 16(3) of the Foreign Exchange Management Act (FEMA), 1999, against Myntra Designs Private Limited, its associated companies, and directors, for alleged violations amounting to Rs 1,654.35 crore. The ED claims that Myntra misused the foreign direct investment (FDI) route by disguising retail operations as wholesale trade.

FDI Policy Violations Under Scanner
According to an official release issued by the Bengaluru Zonal Office of the ED, the complaint follows detailed investigations which were triggered by credible information regarding Myntra’s involvement in multi-brand retail trading (MBRT) under the cover of “Wholesale Cash & Carry” operations. This, the ED claims, violates India's FDI policy restrictions, especially in the context of MBRT, where FDI is either restricted or subject to strict guidelines.

“Directorate of Enforcement (ED), Bengaluru Zonal Office has filed a complaint u/s 16(3) of Foreign Exchange Management Act, 1999 (FEMA) against M/s. Myntra Designs Private Limited (Myntra) and its related companies and their Directors for contravention to the tune of ₹1654,35,08,981/-,” the ED stated.

Alleged Shell Structure: B2B to B2C Masking
The ED investigation found that Myntra Designs Pvt. Ltd. declared itself to be engaged in wholesale trading, thereby receiving FDI worth Rs 1,654.35 crore. However, it allegedly sold the majority of its goods exclusively to Vector E-Commerce Pvt. Ltd., a related company within the same group.

Vector E-Commerce, in turn, sold these goods directly to retail customers, creating a two-step structure that appeared to be B2B (business-to-business) but was in reality B2C (business-to-customer).
 

The ED notes that Vector E-Commerce was “created and continued to be used as a corporate entity to bifurcate the B2C transaction into B2B and then B2C.”

Violation of Group Company Cap
The ED further pointed out that under the Consolidated FDI Policy amendments of April and October 2010, companies engaged in wholesale trading are allowed to make only up to 25% sales to group companies. However, Myntra allegedly made 100% of its sales to Vector E-Commerce, breaching the policy limits.

“Myntra Designs Pvt. Ltd. and others have contravened the provisions as per section 6(3)(b) of the Foreign Exchange Management Act, 1999 and Consolidated FDI Policy dated 01.04.2010 and 01.10.2010,” the ED said in its statement.
 
Complaint Filed Before FEMA Adjudicating Authority
In view of these alleged violations, the agency has filed the complaint before the Adjudicating Authority under FEMA. The proceedings will now be evaluated as per FEMA’s adjudication process.

Myntra has yet to issue an official response to the ED’s complaint.