Explained: What Is FEMA, and Why Is Myntra In a Tight Spot For Violating FEMA?

The Enforcement Directorate has registered a FEMA case against Flipkart-backed e-commerce platform, Myntra, on Wednesday, in-line with the companies and directors for FDI "contravention" of over Rs 1,654 crore.

What Is The Complaint About?

This complaint has been filed under Section 16(3) of the Foreign Exchange Management Act after the federal agency received "credible information" which showed that Myntra Designs Private Limited, with the brand name Myntra, along with its related companies are doing multi-brand retail trade in the disguise of "wholesale cash and carry".

There has been an alleged violation of extant Foreign Direct Investment (FDI) guidelines, the Enforcement Directorate (ED) said.

A case has also been registered against the Bengaluru-headquartered Myntra, its linked companies as well as their directors.

"Myntra Designs have not satisfied the condition laid down for “Wholesale/Cash & Carry Trading” as they have made cent per cent sales to Vector E-Commerce Pvt. Ltd which is in contravention of amendment dated 01.04.2010 and 01.10.2010 which permitted only 25% sale to companies belonging to the same group or group companies. 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 01.10.2010 to the tune of Rs 1654,35,08,981/-."

Violations

Last year, the central agency had conducted searches at certain vendors that were operating on the platforms of Amazon as well as Flipkart for alleged violations of foreign exchange and foreign direct investment (FDI) rules.

Additionally, the agency had also searched 19 premises across New Delhi, Bengaluru, Mumbai, Hyderabad and Panchkula (Haryana) at the "main vendors of Amazon and Flipkart."

The Directorate had also allegedly unearthed certain FEMA violations that are ordinarily civil offences as well as monetary penalties.

Also Read: Myntra Breaks Silence on ED Probe: ‘No Official Complaint Received Yet, Pledges Full Cooperation’