ED slaps FEMA case on Myntra over alleged ₹1,654 crore FDI breach

The Enforcement Directorate (ED) has filed a formal complaint against Myntra Designs Private Limited, a Flipkart-backed company, for alleged violations of India’s foreign direct investment (FDI) rules under the Foreign Exchange Management Act (FEMA), involving funds worth over ₹1,654 crore.

According to a statement issued on Wednesday, the case was registered by the agency’s Bengaluru Zonal Office under Section 16(3) of FEMA, 1999. It targets Myntra, its associated firms, and its directors, citing serious breaches in the handling of foreign investments.

The ED said the case was initiated following “credible information” that Myntra and its related companies were engaged in multi-brand retail trade while presenting themselves as operating a wholesale cash-and-carry business — a move that violates India's FDI policy.

The investigation revealed that Myntra had raised FDI amounting to ₹1,654 crore by claiming to be involved in wholesale trading. However, most of its goods were sold to Vector E-Commerce Pvt. Ltd, a related entity, which subsequently sold the products directly to retail consumers.

“M/s Vector E-Commerce Pvt Ltd. was created and continued to be used as a corporate entity to bifurcate the B2C [business-to-consumer] transaction into B2B (Myntra to Vector) and then B2C (Vector to retail customers),” the ED said.

This structure, according to the agency, allowed Myntra to mask its actual operations, which were essentially multi-brand retail in nature. Under FDI regulations, entities in wholesale trade are restricted from making more than 25% of their sales to group companies. Myntra, however, sold 100% of its goods to Vector, the ED noted.

The ED emphasized that the company’s operations violated the FDI policies laid down on April 1 and October 1, 2010. Additionally, it breached Section 6(3)(b) of FEMA, which regulates how foreign exchange transactions are to be conducted within India’s policy framework.

The formal complaint has now been submitted to the adjudicating authority for further legal proceedings. The agency is expected to continue probing the extent of policy violations and potential regulatory consequences for the involved entities.