New Delhi: The Enforcement Directorate (ED) filed a complaint against Myntra Designs (Myntra), its related companies, and their Directors, under section 16(3) of the Foreign Exchange Management Act, 1999 (FEMA) for alleged offences worth Rs 1,654,35,08,981 on Wednesday.
In an official release, the ED said its probe was based on ‘credible information’ that Myntra and its related companies allegedly conducted Multi Brand Retail Trade (MBRT) under the guise of ‘Wholesale Cash & Carry’, which violates the extant Foreign Direct Investment (FDI) policy.
“ED investigation under the provisions of FEMA,1999 revealed that M/s. Myntra Designs Pvt Ltd. had declared that they were engaged in the business of wholesale cash & carry and invited and received FDI from foreign investors equivalent to Rs 1654,35,08,981/- and that they sold majority of their goods to M/s Vector E-Commerce Pvt Ltd. (who sold the goods in retail to the ultimate customer). That M/s Vector E-Commerce Pvt Ltd and M/s Myntra Designs Pvt Ltd are related parties and belong to the same group or group of companies,” the ED statement says.
“M/s Vector E-Commerce Pvt Ltd was created and continued to be used as corporate entity to bifurcate the B2C (business to customer) transactions of Myntra Designs Pvt Ltd into B2B (business to business) – between Myntra Designs Pvt Ltd and Vector E-Commerce Pvt Ltd – and B2C between Vector E-Commerce Pvt Ltd and retail customers ones,” it adds.
The ED’s investigation also allegedly revealed that Myntra Designs Pvt Ltd was actually carrying out multi-brand retail trading in the guise of wholesale cash and carry.
“Even otherwise, Myntra Designs Pvt Ltd have not satisfied the condition laid down for “Wholesale/Cash and Carry Trading” as they have made cent per cent sales to Vector E-Commerce Pvt Ltd which is in contravention of amendments dated 01.04.2010 and 01.10.2010 which permitted only 25% sale to companies belonging to the same group or group companies. Myntra Designs Pvt Ltd and others have contravened the provisions as per section 6(3)(b) of the Foreign Exchange Management Act, 1999 and Consolidated FDI Policy dated 01.04.2010 and Consolidated FDI Policy dated 01.10.2010 to the tune of Rs 1654,35,08,981,” it is claimed in the statement.
