Myntra Faces ED Probe Over ₹1,654 Crore
• Wholesale Claim, Retail Reality: Myntra Under Scanner
• ED Probes Myntra’s Backdoor Retail Strategy
• FEMA Breach? Myntra Accused of FDI Manipulation
Unmesh Gujarathi
Sprouts News Exclusive
Contact: +91 9322755098
Sprouts News Exclusive
Contact: +91 9322755098
The Enforcement Directorate has filed a case against Myntra and its group entities for allegedly violating FDI norms worth ₹1,654.35 crore. The company is accused of operating retail business under a wholesale license by routing sales through a related firm, breaching FEMA rules. Regulatory scrutiny on e-commerce is intensifying.
ED Registers Case Against Myntra for FDI Irregularities
The Enforcement Directorate (ED) has initiated legal proceedings against Indian fashion e-commerce giant Myntra Designs Pvt. Ltd., along with its associated entities and directors, for alleged violations of India’s Foreign Direct Investment (FDI) regulations totaling ₹1,654.35 crore. The case was registered at the ED’s Bengaluru Zonal Office following credible intelligence inputs.
According to official ED sources, Myntra projected itself as operating under a ‘Wholesale Cash & Carry’ model, a permissible structure under India’s FDI norms. However, deeper investigations revealed that the company was instead engaged in Multi-Brand Retail Trading (MBRT)—a category with more stringent restrictions on foreign investment.
Click Here To Download the News Attachment
Contents
Wholesale Model Used as Facade, ED Alleges
Documents and evidence reviewed by the Sprouts News Investigation Team (SIT) show that the actual business structure adopted by Myntra involved channeling its products primarily to Vector E-Commerce Pvt. Ltd., a related party under the same corporate group. Vector, in turn, retailed the goods directly to end consumers.
This setup was allegedly used to bypass B2C restrictions applicable under India’s FDI framework for e-commerce. ED officials noted that this tactic effectively split direct business-to-consumer (B2C) transactions into two layers—Myntra selling to Vector (B2B) and Vector selling to consumers (B2C)—allowing the company to operate a retail business while remaining disguised under a wholesale license.
As per India’s Consolidated FDI Policy, companies operating in wholesale trading are not allowed to sell more than 25% of their goods to group companies. However, Myntra’s records reportedly indicate that 100% of its wholesale goods were sold to Vector, clearly breaching the legal limit.
Violation of FEMA and FDI Policy Confirmed
The ED stated that these business practices amount to a violation of Section 6(3)(b) of the Foreign Exchange Management Act (FEMA), 1999, along with specific provisions outlined in the Consolidated FDI Policy issued by the Department for Promotion of Industry and Internal Trade (DPIIT).
In light of these violations, a formal complaint has been filed under Section 16(3) of FEMA, and the case will proceed through further legal adjudication. If proven, the entities and individuals involved may face penalties, asset seizures, or prosecution, depending on the adjudication process under FEMA and allied statutes.
There has been no official comment from Myntra or its parent company as of publication time.
Also Read: JSW’s Coke Oven Expansion in Pen Triggers Fierce Local Outcry.
Regulatory Spotlight Tightens on E-Commerce Sector
This case against Myntra adds to a growing list of regulatory actions taken by Indian agencies against e-commerce platforms over FDI compliance violations. The Sprouts SIT notes that several prominent firms, including Amazon, Flipkart, and others, have previously come under similar scrutiny for allegedly circumventing Indian retail laws through complex corporate structures.
The ED’s move signals a tightening enforcement environment where multi-brand retail operations by foreign-funded platforms will be closely monitored for legality, transparency, and adherence to FEMA norms. The case could potentially set a precedent for future enforcement actions in India’s rapidly evolving e-commerce landscape.
The Sprouts News Investigation Team (SIT) will continue to track updates on this probe, including any forthcoming statements by Myntra, developments in legal proceedings, and industry-wide implications for foreign-funded retailers in India.
Key Takeaways:
•ED probe targets Myntra over ₹1,654.35 crore FDI violations.
•Allegation: Myntra masked retail sales under a wholesale model.
•100% of sales routed to group firm Vector E-Commerce, breaching the 25% cap.
•Case filed under FEMA, 1999, may lead to prosecution and penalties.
•E-commerce FDI norms under increasing regulatory focus in India.
