The Enforcement Directorate’s (ED) Bengaluru zonal office said on Wednesday that it booked online fashion retailer Myntra, related companies, and their directors for the alleged contravention of foreign direct investment (FDI) rules involving Rs 1,654 crore.
ED registered the case under section 16 (3) of the Foreign Exchange Management Act (Fema) against Myntra.
According to ED, the agency initiated inquiries on the basis of credible information that Myntra Designs Pvt Ltd and its related companies were engaged in multi-brand retail trade under the guise of “wholesale cash and carry trading”, allegedly in violation of the extant FDI policy.
ED said its investigation revealed that Myntra had declared that it was engaged in the business of “wholesale cash and carry” and invited and received FDI equivalent to Rs 1,654,35,08,981 and that it sold a majority of goods to Vector E-Commerce Pvt Ltd, which retailed the goods.
Vector E-Commerce Pvt Ltd and Myntra Designs Pvt Ltd belong to the same group or group of companies, according to ED. Vector E-Commerce Pvt Ltd was created–and continued to be used as a corporate entity–to bifurcate the B2C (business to customer: Myntra to retail customers) transaction into B2B (business to business: Myntra to Vector E-Commerce Pvt Ltd) and then B2C (Vector E-Commerce Pvt Ltd to retail customers), according to ED.
The investigation also revealed that Myntra did not satisfy the condition laid down for “wholesale/cash & carry trading” as it made cent percent sales to Vector E-Commerce Pvt Ltd in contravention of the amendments dated April 1, 2010, and September 1, 2010, which permitted only 25 per cent sale to companies belonging to the same group or group companies, said ED.
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