Synopsis
The Enforcement Directorate (ED) has filed a complaint against Myntra, a fashion etailer owned by Flipkart, and its related entities under the Foreign Exchange Management Act (Fema), 1999.
AgenciesThe Enforcement Directorate (ED) has filed a complaint under the Foreign Exchange Management Act (Fema), 1999, against Flipkart-owned fashion etailer Myntra, and its related entities for allegedly violating foreign investment rules to the tune of Rs 1,654.35 crore.
Key allegations:
- Myntra is accused of misusing the wholesale ‘cash & carry’ route to conduct multi-brand retail trading (MBRT), which is restricted under the FDI policy.
- The ED found that Myntra received foreign direct investment (FDI) claiming it was for wholesale trading, but routed the majority of sales through Vector E-Commerce Pvt Ltd, a related-party entity that sold directly to consumers.
- This structure was allegedly used to bypass norms by bifurcating B2B and B2C operations, while actually engaging in retail trade.
Violation details:
- As per the FDI policy amendments dated April 1, 2010, and October 1, 2010, only 25% of wholesale sales can go to group companies — a cap Myntra allegedly breached.
- The ED concluded that Myntra and others contravened Section 6(3)(b) of Fema, along with the consolidated FDI policies, resulting in a total contravention amounting to Rs 1,654.35 crore.
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