ED Files Complaint Against Myntra for Violating FDI Rule

July 24, 2025

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Why in the News?

The Enforcement Directorate (ED) has filed a formal complaint under the Foreign Exchange Management Act (FEMA), 1999, against Myntra Designs Private Limited, along with its related entities and directors, over alleged violations of India’s foreign direct investment (FDI) regulations amounting to ₹1,654.35 crore.

According to a press release issued by the agency on Wednesday, the ED initiated action based on credible information suggesting that Myntra was engaged in multi-brand retail trade under the guise of wholesale operations, a practice not permitted under India’s FDI norms.

The agency claims that Myntra attracted foreign investment by presenting itself as a “wholesale cash and carry” entity. However, in reality, the company allegedly routed a majority of its goods to Vector E-Commerce Pvt. Ltd., a firm under the same corporate group, which then sold those products directly to end consumers. This, the ED believes, constituted a backdoor entry into multi-brand retail using foreign funds, something that is strictly regulated in India.

India’s FDI policy prohibits foreign-funded entities from engaging in direct multi-brand retail.

While 100% FDI is allowed in wholesale trading, it comes with clear restrictions, including limits on sales to related parties. The ED’s findings suggest that Myntra may have violated these limits by selling all its stock to a connected firm that functioned as a retail front.

Myntra Responds

In response, Myntra issued a statement defending its operations and legal standing.

“We are deeply committed to upholding all applicable laws of the land and operating with the highest standards of compliance and integrity,” a Myntra spokesperson said. “As a homegrown marketplace, we are committed to contributing to India’s nation-building efforts by empowering the textile and apparel ecosystem through digital commerce.”

The company highlighted its role in supporting Indian artisans, weavers, and small businesses, claiming that it has helped bring traditional craftsmanship to global markets, especially among the Indian diaspora.

Myntra further clarified that it has not yet received a copy of the ED’s complaint or any supporting documents, but added that it is fully prepared to cooperate with the authorities as required.

This development comes amid rising regulatory scrutiny on major e-commerce players in India. Several companies, including Amazon and Flipkart, have previously faced investigations for similar violations involving the use of FDI in retail operations.

If the ED’s allegations are upheld, Myntra could face significant penalties under FEMA and be required to restructure its operations to remain compliant with Indian law.

[Credits for header image: Myntra
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