Myntra, one of India’s leading e-commerce companies, is now facing investigation by the Enforcement Directorate (ED). The agency has initiated action under FEMA, calling it a case of serious violation of foreign investment rules.
The Enforcement Directorate (ED) has registered a case against e-commerce platform Myntra under the Foreign Exchange Management Act (FEMA). The agency says that Myntra and its affiliates have violated the foreign direct investment (FDI) policy by engaging in multi-brand retail trade (MBRT) while presenting themselves as a “wholesale cash and carry” business. It is alleged to be an attempt to circumvent FDI rules by providing false information, while foreign investment in multi-brand retail in India is limited with certain conditions.
According to the ED, Myntra has violated foreign exchange rules of around Rs 1,654 crore. The agency claimed that Myntra made most of its sales through M/s Vector E-Commerce Pvt. Ltd., a company of the same group, and then Vector sold the goods directly to the customers. This arrangement was allegedly created to hide retail business in the name of wholesale trade.
According to a press release issued by the ED, “ED investigation also revealed that Myntra Designs Pvt. Ltd. was actually carrying out multi-brand retail trading in the guise of wholesale cash & carry. Even otherwise, Myntra Designs Pvt. Ltd. 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 companes.”
The release also mentioned, “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 Consolidated FDI Policy dated 01.10.2010 to the tune of Rs. 1654,35,08,981/-. In view of the above, a complaint us 16 (3) of FEMA, 1999 is filed before the Adjudicating Authority under FEMA.”
