The Enforcement Directorate on Wednesday initiated proceedings against Myntra Designs Pvt Ltd, along with related companies and their directors, accusing them of violating foreign investment regulations involving Rs 1,654 crore.
Allegation
The investigation, conducted by the ED’s Bengaluru office, revealed that Myntra claimed to operate under the wholesale cash-and-carry model to attract foreign direct investment (FDI). However, the company allegedly engaged in multi-brand retail trading, which is subject to stricter limits under Indian law.
Use Of Related Entity To Channel Retail Sales
ED’s probe found that Myntra sold the bulk of its products to Vector E-Commerce Pvt Ltd, a sister company within the same corporate group. Vector then retailed the goods to end customers, effectively converting Myntra’s direct consumer sales into a two-step transaction. This setup was reportedly designed to circumvent FDI rules governing retail trade.
“Vector E-Commerce Pvt Ltd and Myntra Designs Pvt Ltd are related parties operating within the same group,” the ED stated.
The agency noted that under amendments to the FDI policy in 2010, wholesale cash-and-carry entities are permitted to sell only up to 25% of their goods to group companies. Myntra, however, allegedly sold 100% of its products to Vector, violating these provisions.
Legal Violations & Regulatory Breach
The ED charged Myntra and its affiliates with contravening Section 6(3)(b) of the Foreign Exchange Management Act (FEMA), 1999, along with relevant consolidated FDI policies from 2010, involving foreign investments totaling Rs 1,654.35 crore.
Read More: Supreme Court, Delhi High Court, States High Court, International
