ED issues FEMA notice to Myntra for violating foreign investment rules

India’s leading fashion e-commerce brand, Myntra has received a notice from the Enforcement Directorate for allegedly violating the country’s foreign investment rules. The financial crime watchdog stated that Flipkart-owned e-commerce platform Myntra received foreign investment worth Rs 1,654 crore by claiming to operate a “wholesale cash and carry” business, but instead sold most of its goods to Vector E-Commerce Pvt Ltd, which then sold them to the consumers. Vector E-Commerce and Myntra Designs, both belong to the same group of companies, according to ED.

The law enforcement agency has initiated action against Myntra and mentioned stakeholders and associated persons under Section 16 (3) of the Foreign Exchange Management Act (FEMA), 1999 FEMA.

"ED, Bengaluru has filed a complaint u/s 16(3) of Foreign Exchange Management Act, 1999 (FEMA) before the Adjudicating Authority under FEMA against M/s. Myntra Designs Private Limited (Myntra) and its related companies and their Directors for contravention to the tune of Rs. 1654,35,08,981/-," read a social media post by ED on X.

India has a policy that prevents foreign companies from participating directly in wholesale business and making direct sales to consumers, in order to protect local retailers. While foreign-owned e-commerce platforms like Myntra, Amazon and Flipkart are allowed to act as marketplaces to connect buyers and sellers, government policies prevent these giants from stocking goods or selling them directly to consumers.