Our Bureau
Mumbai
Myntra, India’s fashion e-commerce company, has found itself in trouble for alleged violation of the Foreign Direct Investment (FDI). As per the reports, the Enforcement Directorate (ED) has registered a case against Myntra, its associated companies and directors for allegedly violating the provisions of FDI of Rs. 1,654.35 crore.
The Enforcement Directorate has given out a statement confirming that the case against Myntra Designs Pvt. Ltd. was registered in the Bengaluru Office of the agency. It is to be noted that ED has registered the complaint on the basis of credible information that suggests that Myntra and its entities have been involved in Multi-Brand Retail Trading (MBRT). This violates the FDI policy of the country as Myntra has presented themselves as operating under a ‘Wholesale Cash & Carry’ model.
The investigations have revealed that Myntra has received FDI amounting to ₹1,654.35 crore as they were reportedly operating a wholesale business. Later in the investigation it was found that a heavy portion of the goods were sold exclusively to M/s Vector E-Commerce Pvt. Ltd. Vector E-Commerce is a related company that belongs to the same corporate group, which then retailed the goods to end consumers.
According to the ED, this model was majorly created to move direct B2C (Business-to-Consumer) transactions into a B2B (Business-to-Business) arrangement between Myntra and Vector which will then be followed by a B2C model between Vector and the retail consumers. These changes in models were effectively violating the restrictions on multi-brand retail under FDI norms, as per the ED.
The registration of this case against Myntra has highlighted the increasing regulatory scrutiny in the e-commerce sector to comply with the norms of FDI. Myntra has not yet responded to the case registration and has not spoken on the matter.
