ED files FEMA complaint against Myntra over alleged Rs 1,654 cr FDI violation

The Enforcement Directorate (ED) has lodged a complaint under the Foreign Exchange Management Act (FEMA), 1999, against Myntra Designs Pvt. Ltd, its associated entities, and directors, for alleged contraventions amounting to Rs 1,654.35 crore.

According to the ED, Myntra and its group companies allegedly conducted Multi-Brand Retail Trade (MBRT) activities while projecting themselves as engaged in "Wholesale Cash & Carry" operations. This, the agency states, was in breach of the prevailing Foreign Direct Investment (FDI) policy, which restricts foreign investment in MBRT under specific conditions.

The probe revealed that the majority of Myntra's sales were routed through Vector E-Commerce Pvt. Ltd, an affiliate within the same corporate group, which in turn sold the goods directly to consumers. The ED alleges that Vector was purposefully created to repackage business-to-consumer (B2C) transactions as business-to-business (B2B) dealings on paper, effectively sidestepping the FDI limitations on multi-brand retail.

“The entire arrangement was designed to present retail sales as wholesale business. Vector E-Commerce and Myntra belong to the same group of companies,” the ED said in an official release, adding that Myntra had received foreign investments to the tune of Rs 1,654.35 crore while declaring itself a wholesale operator.

The ED further stated that Myntra made 100 per cent of its sales to Vector, which violates the FEMA and the Consolidated FDI Policy amendments of April and October 2010. As per the policy, only up to 25 per cent of sales are allowed to group companies.

Based on these findings, the ED has filed a formal complaint under Section 16(3) of FEMA with the adjudicating authority. The investigation was triggered by “credible information” about potential violations in how Myntra was conducting its business operations.

In response, a Myntra spokesperson reiterated the company’s commitment to compliance, stating, “We are deeply committed to upholding the laws of the land and maintaining the highest standards of integrity.”

The spokesperson added that Myntra, as a homegrown platform, plays a pivotal role in promoting Indian textiles and craftsmanship through digital commerce. “We have empowered countless artisans, weavers, and small businesses, thereby bolstering employment and entrepreneurship across the country,” the statement noted.

Myntra further clarified that it has not yet received a copy of the ED's complaint or accompanying documents but remains ready to cooperate fully with authorities.

This is not the first time Myntra has faced regulatory scrutiny. In 2015, the Kerala commercial tax department levied a Rs 2.23 crore fine against the company for alleged irregularities during 2012–14.

However, the Kerala High Court later set aside the penalty, citing procedural lapses and ambiguity regarding the classification of transactions as intra-state or inter-state, which impacts tax liability. The court ruled that such penalties could not be imposed without affording the company a proper hearing.