Myntra, one of India’s leading online fashion retailers and a subsidiary of Flipkart, has come under the scanner of the Enforcement Directorate (ED) for alleged violations of foreign direct investment (FDI) regulations. The ED has initiated a case under the Foreign Exchange Management Act (FEMA), citing potential breaches involving a total amount of Rs 1654 crore.
According to official sources, the ED is examining whether Myntra operated in a manner that conflicts with India's FDI guidelines, particularly in the context of inventory-based e-commerce models. Under current rules, FDI in e-commerce is permitted only in marketplace models, where platforms serve as intermediaries between buyers and sellers without owning any inventory. However, any control or influence over inventory by the platform is considered a violation.
The case reportedly stems from financial transactions and investments routed through foreign-based parent entities that may have given Myntra operational control beyond what is allowed under Indian regulations. Investigators are believed to be reviewing financial documents, shareholding structures, vendor agreements, and business practices of the platform to assess compliance.
Myntra has been asked to submit a detailed explanation and provide documentation related to its ownership structure, foreign investments, and internal operations. Flipkart, which owns Myntra and is itself backed by Walmart, has also come under occasional regulatory scrutiny in the past regarding compliance with FDI norms.
A senior official familiar with the development said the ED’s interest in Myntra is part of a broader probe into how e-commerce platforms may be circumventing FDI rules through complex corporate arrangements. These often involve using third-party sellers that may be closely aligned or controlled by the parent platform, indirectly violating the rules set by the Department for Promotion of Industry and Internal Trade (DPIIT).
This is not the first time that Flipkart and its subsidiaries have faced regulatory heat. In earlier instances, complaints were filed by traders' associations alleging that large e-commerce firms were engaging in deep discounting and monopolistic practices, facilitated by violating FDI regulations.
In response to media queries, Myntra has reportedly stated that it adheres to all Indian laws and will cooperate fully with the investigation. The company emphasized its commitment to transparency and regulatory compliance.
Legal experts believe that the outcome of this case could have broader implications for the Indian e-commerce sector, particularly regarding how platforms structure their business models to remain within the boundaries of Indian FDI laws.
The ED is expected to continue its probe in the coming weeks. If violations are established, penalties under FEMA may include fines and restrictions on future foreign investments. Industry observers are closely watching the developments, as the case may influence future regulatory actions and business strategies across the e-commerce space in India.
