The Enforcement Directorate (ED) has initiated proceedings against online fashion giant Myntra and its associated companies for allegedly violating foreign direct investment (FDI) regulations to the tune of over ₹1,654 crore.
The Bengaluru Zonal Office of the ED announced on Wednesday that it has registered a case under Section 16(3) of the Foreign Exchange Management Act (FEMA) against Myntra Designs Pvt Ltd and its related entities. The agency claims the companies misused FDI norms by engaging in multi-brand retail operations under the cover of wholesale cash-and-carry trading.
According to the ED, the action follows credible intelligence suggesting that Myntra and its affiliates structured transactions to bypass FDI rules. The company had reportedly declared its business model as “wholesale cash and carry” to attract FDI but, in practice, routed nearly all sales to a related entity, Vector E-Commerce Pvt Ltd.
Both Myntra Designs and Vector E-Commerce are part of the same corporate group. The ED alleges that Vector E-Commerce was specifically established to reclassify business-to-customer (B2C) sales as business-to-business (B2B), followed by B2C sales — effectively masking the true nature of retail transactions to comply on paper with FDI guidelines.
Investigators found that Myntra received foreign investment worth ₹1,654.35 crore based on this model. However, the company violated FDI policy amendments from April and September 2010, which limit sales to group companies to just 25% of total turnover under the wholesale trading route. In Myntra’s case, 100% of sales reportedly went to Vector E-Commerce.
The ED said further action under FEMA is underway, and the role of company directors is also being examined as part of the probe.
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