ED Books Myntra in Rs 1,654-Crore FEMA Case Over FDI Norms Violation
Enforcement Directorate (ED) has filed a high-profile case under the Foreign Exchange Management Act (FEMA), citing violations worth Rs 1,654 crore, against Bengaluru-headquartered fashion e-tailer Myntra Designs Pvt Ltd, its related entities, and directors. The case stems from credible information that Myntra and associated companies were conducting illegal multi-brand retail trading (MBRT) activities through a structure meant only for wholesale trading operations13.
According to the Bengaluru Zonal Office of the ED, the investigation found that Myntra received Foreign Direct Investment (FDI) ostensibly for permitted wholesale “cash & carry” activities. However, the agency alleges that most of these goods were sold through a group entity, Vector E-Commerce Pvt Ltd, which then sold directly to retail customers. This two-step structure, according to the ED, was designed to mask actual business-to-consumer (B2C) retail sales as business-to-business (B2B), thereby circumventing India’s FDI policy that tightly restricts foreign investment in MBRT15.
The complaint names Myntra, select related companies, and their directors for suspected contravention of FEMA Section 16(3) involving the entire sum of Rs 1,654.35 crore. The ED asserts that the FDI policy only allows up to 25% of wholesale sales to group companies; Myntra allegedly breached this cap and carried out large-scale retail trade in disguise1.
This enforcement comes at a time of heightened regulatory scrutiny for major e-commerce firms in India, especially those with significant foreign investment. Recently, the government has probed and searched several top vendor locations of e-commerce giants to examine compliance with FDI and foreign exchange rules2. The ED’s focus on the subtleties of business structures—specifically, the separation of B2B and B2C—reflects concerns that some firms exploit regulatory loopholes, using related entities to present consumer sales as compliant wholesale transactions4.
Officials confirm that the probe is ongoing, with further details regarding individual liability and potential penalties expected to emerge as the investigation deepens.
