ED files FEMA complaint against Myntra for alleged FDI violations worth Rs 1,654 crore

NEW DELHI: The Enforcement Directorate (ED) has filed a complaint under the Foreign Exchange Management Act, 1999 (FEMA) against Myntra Designs Pvt Ltd, its related entities and their directors for alleged violations amounting to Rs 1,654.35 crore, the agency said on Wednesday.

The action was initiated by ED’s Bengaluru Zonal Office following credible information that Myntra Designs Pvt Ltd (Myntra) and its related companies are doing Multi Brand Retail Trade (MBRT) in the guise of ‘Wholesale Cash & Carry’, allegedly in violation of the extant FDI Policy.

The ED said its investigation under the provisions of FEMA, 1999 revealed that “Myntra Designs Pvt Ltd had declared that they were engaged in the business of ‘wholesale cash & carry’ and invited and received FDI from foreign investors equivalent to Rs 1654,35,08,981 and that they sold majority of their goods to Vector E-Commerce Pvt Ltd (who sold the goods in retail to the ultimate customer)”.

“That Vector E-Commerce Pvt Ltd and Myntra Designs Pvt Ltd are related parties and belong to same group or group of companies,” said the agency. It further said that Vector E-Commerce Pvt Ltd was created and continued to be used as a corporate entity to bifurcate the B2C (business to customer i.e. Myntra Designs Pvt Ltd to retail customers) transaction into B2B (Myntra Designs Pvt Ltd to Vector E-Commerce Pvt Ltd) and then B2C (Vector E-Commerce Pvt Ltd to retail customers).

The 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 and carry trading” as they have made cent per cent sales to Vector E-Commerce Pvt Ltd which is in contravention of amendment dated April 1, 2010 and October 1, 2010 which permitted only 25 per cent sale to companies belonging to the same group or group companies”.

As per the ED, 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 April 1, 2010 and consolidated FDI Policy dated October 1, 2010 to the tune of Rs. 1654,35,08,981. (ANI)