ED Slaps ₹1,654 Crore FEMA Violation Complaint Against Myntra & Affiliates Over Alleged FDI Policy Breach
(Syed Ali Taher Abedi)
Bengaluru, July 23: The Directorate of Enforcement (ED), Bengaluru Zonal Office, has filed a high-profile complaint under Section 16(3) of the Foreign Exchange Management Act, 1999 (FEMA) against M/s. Myntra Designs Private Limited, its affiliated companies, and their directors. The complaint alleges massive contravention of FEMA provisions involving foreign direct investment (FDI) to the tune of ₹1,654.35 crore.
The ED initiated its investigation based on credible intelligence that Myntra and its group entities were engaged in Multi-Brand Retail Trading (MBRT) under the guise of ‘Wholesale Cash & Carry’ operations, in apparent violation of India’s FDI regulations.
Key Findings of ED’s FEMA Investigation: Myntra Designs Pvt. Ltd. had declared itself to be operating as a wholesale cash & carry business and had invited FDI worth ₹1,654.35 crore from foreign investors under that premise. However, the ED uncovered that Myntra sold nearly all its goods to a related party—M/s. Vector E-Commerce Pvt. Ltd., which subsequently retailed the products to consumers, effectively functioning as a front for B2C (business-to-customer) sales. The ED alleges that Myntra and Vector E-Commerce are part of the same group, and the entire structure was designed to mask direct retail operations—which are tightly regulated under India’s FDI rules. Under FDI Policy amendments dated April 1, 2010, and October 1, 2010, wholesale entities are restricted to selling no more than 25% of their total turnover to group companies. The ED’s probe found that Myntra flouted this cap entirely by selling 100% of its goods to its own group company, thereby violating Section 6(3)(b) of FEMA, 1999.
Corporate Structuring Under Scrutiny
According to the ED, Vector E-Commerce Pvt. Ltd. was strategically established to act as a B2B intermediary, allowing Myntra to circumvent regulatory restrictions on direct retail sales by funnelling products through Vector before reaching the end consumer. This bifurcation of B2C transactions into B2B and then B2C was allegedly a deliberate attempt to sidestep FDI limits on multi-brand retail.
Complaint Filed Before Adjudicating Authority
In light of the findings, the Enforcement Directorate has formally filed a complaint under Section 16(3) of FEMA before the Adjudicating Authority. The complaint accuses Myntra and its associated companies of serious FDI violations, misleading declarations, and improper structuring to bypass restrictions meant to protect India’s retail ecosystem.This development marks one of the largest FEMA violation complaints in recent years and could have significant implications for other e-commerce and retail players operating under similar models.
