Enforcement Directorate
The Bangalore Zonal Office of the Enforcement Directorate (ED) has filed a complaint against the Foreign Exchange Management Act, 1999 (FEMA) under Section 16 (3) of the Ministry Designs Private Limited (Myntra), its companies and their directors in the case of FEMA violation of about ₹ 1654.35 crore.
What is the matter?
The ED was informed that Myntra and its associate companies are doing multi-brand retail trading (MBRT) in the name of ‘Wholesale Cash and Carrie’ business in the name of ‘Wholesale Cash and Carrie’ Business.
Investigation revealed that Myntra showed that she was doing wholesale business, and on this basis, foreign investment of more than ₹ 1654 crore was made. But in reality, Myntra has all its products Vector E-Commerce Pvt. Ltd. Sold to which they sold to common customers in retail.
How was the scam done?
- Myntra and Vector E-Commerce are both companies of the same group.
- By sending goods from one company to another, B2B (Business to Business) was shown and then the second company of the same group sold it to common customers and converted it into B2C (Business to Customer).
- Its aim was to show the law -based wholesale business, but in reality the retail business should be done.
Where did the law violate?
According to the FDI policy, a wholesale company can sell goods to another company of its group only 25%. But Myntra sold 100% goods to its own group company Vector, which is a direct violation of the law.
In this way myntra and its associated companies have violated Section 6 (3) (b) and FDI policies (01.04.2010 and 01.10.2010) of FEMA. Because of this, ED has filed a complaint in front of adjudicating authority under Section 16 (3) of FEMA.
In fact, it is alleged that the Mintra did a multi-brand retail business in violation of the rules, while he made foreign investment of more than ₹ 1654 crore by stating the wholesale business. Now the ED has started legal action in this case.