Indian fashion e-commerce major Myntra has come under the scanner of the Enforcement Directorate (ED) for allegedly violating Foreign Direct Investment (FDI) norms amounting to ₹1,654.35 crore. The ED, in a statement issued from its Bengaluru Zonal Office, said it has registered a case against Myntra Designs Pvt. Ltd., its associated companies, and its directors under the Foreign Exchange Management Act (FEMA), 1999, following “credible inputs” pointing to regulatory breaches.
The probe agency alleges that Myntra, while claiming to operate under a ‘Wholesale Cash & Carry’ model permitted under India’s FDI policy, was actually engaged in Multi-Brand Retail Trading (MBRT), a sector that is tightly regulated when it comes to foreign investments. The agency says this amounts to a clear violation of both the spirit and the letter of the FDI policy framework.
Investigations by the ED revealed that Myntra had secured FDI to the tune of ₹1,654.35 crore on the premise of conducting wholesale operations. However, a significant part of these goods was sold to a related entity—Vector E-Commerce Pvt. Ltd.—which then retailed the products to individual consumers. Both Myntra and Vector E-Commerce are part of the same corporate group.
The ED argues that this operational structure was intentionally designed to create a two-tier model—first a B2B (Business-to-Business) transaction between Myntra and Vector, followed by a B2C (Business-to-Consumer) transaction between Vector and the end consumers. This approach, according to the agency, effectively served as a mechanism to bypass restrictions on foreign investment in multi-brand retailing.
Under FDI policy amendments that came into effect on April 1 and October 1 of 2010, companies operating under the wholesale model are allowed to sell only up to 25% of their goods to entities of the same group. Myntra, however, is said to have sold 100% of its products to Vector E-Commerce, a breach of this regulatory cap.
“This deliberate circumvention of FDI norms represents a significant violation of section 6(3)(b) of FEMA, 1999, and provisions outlined in the Consolidated FDI Policy,” the ED stated.
Based on these findings, the agency has now lodged a formal complaint under Section 16(3) of FEMA, initiating the next phase of legal proceedings. The ED emphasized that the case points to broader compliance issues within the e-commerce sector, which has attracted growing scrutiny from regulatory authorities in recent years.
At the time of publishing, Myntra had not issued any official response to the allegations or the ED’s actions.
Industry watchers say the case could serve as a bellwether for how India plans to enforce FDI compliance, particularly in the rapidly growing e-commerce space, where companies often operate complex structures to navigate existing policy limitations.
Legal experts believe this development may prompt other e-commerce firms to reevaluate their operational models and ensure strict adherence to FDI guidelines. “The ED’s actions indicate a clear shift towards tighter enforcement, and the sector can expect more such probes in the future,” said a senior legal advisor familiar with FEMA regulations.
This is not the first time e-commerce giants have been accused of violating FDI norms in India. In the past, global platforms like Amazon and Flipkart have also come under similar scrutiny, although no formal charges were filed in those instances.
The current action against Myntra adds to the pressure on e-commerce players to operate with greater transparency and regulatory compliance, especially with growing political and public attention on the sector’s influence on traditional retail.
