E-commerce giant accused of bypassing India’s multi-brand retail rules through related-party sales.
The Enforcement Directorate (ED) has initiated a probe against Myntra Designs Pvt. Ltd., its associated companies, and directors over alleged violations of Foreign Direct Investment (FDI) norms amounting to ₹1,654.35 crore.
The case has been registered by ED’s Bengaluru Zonal Office, highlighting growing regulatory scrutiny in India’s booming e-commerce sector.
Why is Myntra Under the Scanner?
- The ED alleges Myntra misused the wholesale model to circumvent India’s multi-brand retail trading (MBRT) restrictions.
- Although Myntra claimed to operate under a ‘Wholesale Cash & Carry’ model, investigations revealed that goods were sold exclusively to Vector E-Commerce Pvt. Ltd., a related company in the same corporate group.
- Vector E-Commerce then retailed these goods directly to end consumers—essentially functioning as a B2C platform disguised as B2B transactions.
What Did the Investigation Reveal?
✅ FDI received under false pretenses: Myntra reportedly received ₹1,654.35 crore in FDI while claiming a wholesale-only model.
✅ 100% sales to related company: Under FDI policy (April & October 2010 amendments), wholesale businesses can sell only up to 25% of their stock to related group companies. Myntra allegedly sold 100% to Vector E-Commerce, violating the limit.
✅ Violation of FEMA provisions: ED stated Myntra and associated entities breached Section 6(3)(b) of FEMA, 1999, and Consolidated FDI Policy norms.
What Happens Next?
- A formal complaint has been filed under Section 16(3) of FEMA for further legal action.
- There has been no immediate response from Myntra regarding the allegations.
- The case could lead to penalties, stricter oversight, and further investigations into related e-commerce practices.
Why This Matters for India’s E-Commerce Sector
This case adds to the increasing regulatory pressure on e-commerce players in India. Authorities have been closely monitoring whether foreign-funded online retailers are indirectly violating multi-brand retail restrictions.
Key Takeaways
- Myntra accused of misusing FDI norms to bypass MBRT rules.
- ED probe reveals 100% of sales made to a related entity, breaching 25% limit.
- Violation of FEMA 1999 and Consolidated FDI Policy confirmed by ED.
- Legal action under FEMA Section 16(3) underway.
