BENGALURU: The Enforcement Directorate has filed a formal complaint against Myntra Designs Pvt Ltd and its related entities for allegedly violating India’s foreign direct investment (FDI) norms under the guise of wholesale operations.The complaint, filed under Section 16(3) of the Foreign Exchange Management Act (Fema), 1999, alleged contraventions to the tune of Rs 1,654.35 crore against the Flipkart Group-owned online fashion retailer.ED’s Bengaluru Zonal Office said that the case stems from inputs suggesting that Myntra was carrying out multi-brand retail trade (MBRT) while claiming to operate under the wholesale “cash and carry” model. FDI in MBRT is tightly regulated in India and not permitted unless specific conditions are met. Wholesale businesses, on the other hand, are allowed to receive FDI under automatic approval with fewer restrictions.The ED’s investigation found that Myntra received foreign investments amounting to Rs 1,654.35 crore by declaring itself as a wholesale cash and carry business. However, the agency said most of these goods were sold to Vector E-Commerce Pvt Ltd, a related party, which then sold the products directly to retail consumers. This two-step structure, B2B sales from Myntra to Vector, followed by B2C sales from Vector to end-customers, effectively enabled direct retail using FDI that was approved only for wholesale operations, the ED alleged.The agency stated that both Myntra and Vector E-Commerce belonged to the same group of companies and that the 25% cap on related-party sales, mandated by FDI policy amendments in 2010, was breached. It also noted that Myntra continued to execute what was effectively retail trading despite claiming to operate under the wholesale model, in violation of both FEMA provisions and Consolidated FDI Policy guidelines.In response to the ED’s action, a Myntra spokesperson said that it had not yet received a copy of the complaint or supporting documents but remained committed to cooperating with authorities. The spokesperson added that the company operates with “the highest standards of compliance and integrity” and has contributed to digitising India’s textile and apparel ecosystem by working with brands, artisans and weavers.The complaint has been submitted to the Adjudicating Authority under Fema. It comes at a time when parent company Flipkart is preparing for a potential public listing, with investors closely tracking regulatory risks across the group’s entities.
