The Enforcement Directorate (ED) on Wednesday said that it has filed a case against Myntra Designs, its associated companies and their directors for allegedly violating foreign direct investment (FDI) norms to the tune of Rs 1,654.35 crore. The proceedings have been initiated by ED’s zonal office in Bengaluru under Section 16(3) of the Foreign Exchange Management Act (Fema), 1999.
Charges against Flipkart
The central charge against the Flipkart-backed fashion and lifestyle e-commerce platform is that it engaged in multi-brand retail trade (MBRT) under the guise of wholesale cash and carry, which is barred from receiving FDI under current policy. As per prevailing rules, FDI is not allowed in inventory-led e-commerce models and is permitted only in entities operating via a marketplace model.
According to the ED, Myntra Designs received foreign investment amounting to over Rs 1,654 crore claiming it was in the wholesale trading business. However, the agency alleged that the company made 100% of its sales to Vector E-Commerce, a related entity within the same corporate group. Vector then retailed these goods directly to end-consumers. The ED claims this structure was designed to circumvent restrictions on FDI in MBRT by artificially splitting business-to-customer (B2C) transactions into business-to-business (B2B) followed by B2C.
The agency further stated that even if Myntra’s activities were to qualify as wholesale, it would still be in contravention of FDI policy, which allows such entities to sell no more than 25% of their products to group companies. The agency said that Myntra and its associates had violated both Fema provisions and the FDI policy guidelines to the full extent of the FDI received.
Myntra responds
In response to the development, a Myntra spokesperson said the company remains committed to full compliance with Indian laws and would cooperate with the authorities. “At Myntra, we are deeply committed to upholding all applicable laws of the land and operating with the highest standards of compliance and integrity. While we have not received a copy of the subject complaint and the supporting documents from the authorities, we remain fully committed to cooperating with them at any point of time,” the spokesperson said.
Defending its business model, the company underlined its contribution to the digital commerce landscape. “As a homegrown marketplace, we are committed to contributing to India’s nation-building efforts by empowering the textile and apparel ecosystem through digital commerce. By working closely with Indian brands and sellers, artisans, and weavers, we have helped bring traditional craftsmanship to a global audience, particularly among the Indian diaspora,” the company added.
Myntra was founded in 2007 and is now a part of Walmart-owned Flipkart Group, and has more than 70 million monthly active users and offers over 3.9 million fashion and lifestyle products from nearly 9,700 brands.
The Confederation of All India Traders (CAIT) has repeatedly raised concerns over foreign-funded e-commerce platforms allegedly violating FDI rules through indirect inventory control, deep discounting, and predatory pricing, urging the government to act decisively against such practices.