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ED files Fema complaint against Myntra over ₹1,654 crore FDI violation
The investigative agency has taken the action under Section 16(3) of the Foreign Exchange Management Act, 1999 (FEMA). The ED said that enquiries in the matter were initiated on the basis of credible information that Myntra and its related companies were engaged in multi-brand retail trade (MBRT) under the guise of wholesale cash-and-carry, allegedly in violation of the existing FDI policy.
The ED investigation under the provisions of FEMA, 1999 revealed that Myntra Designs Pvt Ltd had declared it was engaged in wholesale cash-and-carry business and had invited and received FDI from foreign investors amounting to ₹1,654.35 crore. The firm sold a majority of its goods to Vector E-Commerce Pvt Ltd, which in turn sold the goods in retail to end customers. Vector E-Commerce Pvt Ltd and Myntra Designs Pvt Ltd are related parties and belong to the same group or group of companies.
'Vector E-Commerce Pvt Ltd was created and continued to be used as a corporate entity to bifurcate the B2C [business-to-customer, i.e. Myntra Designs Pvt Ltd to retail customers] transaction into B2B (Myntra Designs Pvt Ltd to Vector E-Commerce Pvt Ltd) and then B2C (Vector E-Commerce Pvt Ltd to retail customers),' said the ED statement.
The ED further stated that its investigation also revealed Myntra Designs Pvt Ltd was actually carrying out multi-brand retail trading in the guise of wholesale cash-and-carry.
The ED also noted that Myntra Designs Pvt Ltd had not met the conditions laid down for wholesale cash-and-carry trading, as it had made 100 per cent of its sales to Vector E-Commerce Pvt Ltd. This contravenes the amendments dated 1 April 2010 and 1 October 2010, which permitted only 25 per cent of sales to companies belonging to the same group or group companies.
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