ED files complaint against Myntra for violation of Rs 1654 crore

Investigation by ED under the provisions of FEMA, 1999 revealed that M/s Myntra Designs Private Limited had declared that they were engaged in the business of wholesale cash and carry.

Bangaluru: The Bangalore Regional Office of the Enforcement Directorate (ED) has filed a complaint of violation of Rs 1654 crore under Section 16 (3) of the Foreign Exchange Management Act, 1999 (FEMA) against M/s Myntra Designs Private Limited (Myntra) and its related companies and their directors.

According to the Enforcement Directorate, the investigation in this case was initiated on the basis of a credible information that M/s Myntra Designs Private Limited (Myntra) and its related companies were allegedly doing Multi Brand Retail Trade (MBRT) under the guise of 'wholesale cash and carry' in violation of the existing FDI policy.

Investigation by ED under the provisions of FEMA, 1999 revealed that M/s Myntra Designs Private Limited had declared that they were engaged in the business of wholesale cash and carry. They have received Foreign Direct Investment (FDI) worth Rs 1654,35,08,981 from foreign investors. According to the ED, M/s Myntra Designs Pvt Ltd sold most of its goods to M/s Vector E-Commerce Pvt Ltd (which sold the goods in retail to the end customer). Both M/s Vector E-Commerce Pvt Ltd and M/s Myntra Designs Pvt Ltd belong to the same group or group of companies.

M/s Vector E-Commerce Pvt Ltd was formed and continued to be used as a corporate entity to split the B2C (Business to Customer i.e. Myntra Designs Pvt Ltd to retail customer) transactions into B2B (Myntra Designs Pvt Ltd to Vector E-Commerce Pvt Ltd) and then B2B (Vector E-Commerce Pvt Ltd to retail customer).

The ED investigation also revealed that Myntra Designs Pvt Ltd was actually conducting multi-brand retail business under the guise of wholesale cash and carry. Further, Myntra Designs Pvt Ltd has not fulfilled the conditions prescribed for wholesale/cash & carry trading as they have sold 100% to Vector E-Commerce Pvt Ltd. Due to this, a case has been registered against the company.

The company has violated the amendments dated 01.04.2010 and 01.10.2010. In these, only 25% of the sales were allowed to companies belonging to the same group or group companies. Myntra Designs Pvt Ltd and others have violated the provisions of Section 6(3)(b) of the Foreign Exchange Management Act, 1999 and the Consolidated FDI Policy dated 01.04.2010 and Consolidated FDI Policy dated 01.10.2010. The amount is Rs 1654 crore. In view of the above, a complaint under Section 16(3) of FEMA, 1999 is filed before the Adjudicating Authority under FEMA.