The Enforcement Directorate (ED) has filed a case under the Foreign Exchange Management Act (FEMA) against Flipkart-backed Myntra and its associated entities for alleged violations of Foreign Direct Investment (FDI) norms, amounting to ₹1,654.40 crore.
According to the ED, Myntra Designs Pvt Ltd and its related companies are accused of engaging in multi-brand retail trading under the guise of wholesale cash-and-carry operations a clear violation of India’s FDI regulations. The case has been registered under Section 16(3) of the FEMA Act, 1999, based on credible information indicating the misuse of FDI guidelines.
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The preliminary investigation revealed that the companies, while claiming to operate as wholesale businesses, were extensively involved in direct retail sales to consumers. This includes operating in a manner that bypassed FDI restrictions applicable to e-commerce entities engaged in multi-brand retail. The ED has stated that Myntra's business model violates specific FEMA rules that restrict e-commerce platforms from direct retailing to customers. Although the company presented its business as wholesale logistics, the actual operation allegedly involved direct sales of multi-brand products to end consumers.
As a part of the ongoing probe, ED is closely examining the financial records and investment patterns of the involved companies. If necessary, the agency is likely to take further action, including financial penalties or asset seizures. This is not the first time ED has taken action under FEMA against major firms in the Indian e-commerce sector. The case has reignited discussions around how foreign investment rules are interpreted and possibly circumvented by large online retail platforms such as Myntra and its partner companies.