New Delhi: The Enforcement Directorate (ED) on Wednesday said that it has filed a formal complaint against Myntra Designs Private Limited, its related companies, and their directors for alleged violations under the Foreign Exchange Management Act (FEMA), 1999.
The action was taken by the Bengaluru Zonal Office of the ED, accusing the company of illegal foreign investment practices amounting to Rs 1,654.35 crore.
According to an official statement, the ED launched its investigation based on credible information that Myntra and its related companies were allegedly engaged in multi-brand retail trading (MBRT) while claiming to operate as a wholesale cash and carry business.
This setup, the ED said, is in direct violation of India’s Foreign Direct Investment (FDI) policy.
The ED’s investigation revealed that Myntra Designs Private Limited had received foreign direct investment worth over Rs 1,654 crore by declaring that it was involved in wholesale business.
However, the agency found that the company sold most of its goods to another firm — Vector E-Commerce Private Limited — which then sold those goods directly to retail customers.
What raised concerns, the ED noted, is that both Myntra Designs and Vector E-Commerce belong to the same group of companies.
The structure was allegedly created to bypass FDI rules by disguising direct retail sales as business-to-business (B2B) transactions followed by retail (B2C) sales through Vector.
The ED added that Myntra’s operations violated the FDI rules introduced in April and October of 2010, which clearly state that only up to 25 per cent of wholesale sales can be made to group companies.
Myntra, however, made 100 per cent of its sales to Vector, which the ED claims is a clear breach of the law.
Based on these findings, the ED has filed a complaint under Section 16(3) of FEMA, 1999 before the Adjudicating Authority.
The agency alleges that the companies involved have violated Section 6(3)(b) of FEMA and the Consolidated FDI Policy guidelines to the tune of Rs 1,654.35 crore.
(IANS)
