Blitz Bureau
The Directorate of Enforcement (ED) said on July 23 that it had filed a complaint against Myntra Designs Pvt. Ltd. and its related companies and their directors for allegedly deploying foreign direct investment (FDI) indirectly in retail operations in violation of Foreign Exchange Management Act, 1999, according to a report in Mint.
ED’s Bengaluru zonal office filed the complaint for the alleged contravention to the tune of Rs 1,654.35 crore, the agency said in a statement.
“The enquiries in the matter were initiated on the basis of a credible information that Myntra Designs Pvt. Ltd. and its related companies are doing multi brand retail trade in the guise of ‘wholesale cash and carry’, allegedly in violation of the extant FDI Policy,” the ED statement said.
The Consolidated FDI Policy of 2010 forbids foreign ownership of retail operations in India, except for retailing of single brands. For selling single brands, up to 51 per cent foreign ownership is allowed under Government approval route.
ED files complaint for alleged forex offences exceeding Rs 1,645 crore
A spokesperson for Myntra said the company is deeply committed to upholding all applicable laws of the land and operating with the highest standards of compliance and integrity.
“As a home-grown 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 spokesperson said.
“In doing so, we’ve strengthened the industry’s digital backbone and created large-scale employment and entrepreneurship opportunities across the country. 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,” added the Myntra spokesperson.
ED stated that its investigation under the provisions of FEMA showed that Myntra had declared that they were engaged in the business of wholesale cash and carry and invited and received FDI from foreign investors equivalent to Rs 1,654.35 crore and that they sold majority of their goods to Vector E-Commerce Pvt. Ltd., which sold the goods in retail to the ultimate customer.
The agency, which investigates offences of money laundering and violations of foreign exchange laws, also alleged that Vector E-Commerce and Myntra are related parties and belong to same group or group of companies. Queries emailed by Mint to Vector E-Commerce Pvt. Ltd. remained unanswered till press time.
Vector E-Commerce Pvt. Ltd. was created and continued to be used as corporate entity to bifurcate the ‘business to customer’ transactions, that is, Myntra to retail customers, into ‘business to business’ transactions, that is, Myntra to Vector and then Vector to retail customers, a business to consumer transaction, the ED statement alleged.
ED said its investigation also revealed that Myntra Designs was allegedly carrying out multi-brand retail trading in the guise of wholesale cash and carry. Even otherwise, Myntra Designs has not satisfied the condition laid down for ‘wholesale / cash and carry trading’ as they have made cent per cent sales to Vector E-Commerce in contravention of the 25 per cent limit for sales to companies belonging to the same group or group companies.
Myntra and others have contravened the provisions of the FEMA and the consolidated FDI Policy dated 1 April 2010 and the consolidated FDI policy dated 1 October 2010 to the tune of Rs1,654.35 crore, ED said, adding that the complaint was filed before the adjudicating authority, a senior ED official.