The Bangalore Zonal Office of the Enforcement Directorate (ED) has filed a complaint against the FOREN Exchange Management Act, 1999 (FEMA) in the case of FEMA violations of about ₹ 1,654.35 crore against the Mining Designs Private Limited i.e. Myntra, its companies and their directors. Since then, there has been a stir in this case. In fact, it is alleged that Mantra did a multi-brand retail business in violation of the rules, while she made foreign investment of more than ₹ 1654 crore, stating wholesale business. Now the ED has started legal action in this case.
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 India violating the Foreign Investment (FDI) policy implemented in India. Investigation revealed that Mantra showed that she was doing wholesale business, and on this basis, foreign investment of more than ₹ 1654 crore was made. But in reality, Mantra sold all his products vector to e-commerce Private Limited, which sold them to common customers in retail.
How was the scam done?
Both Minyantra and Vector E-Commerce Private Limited are both companies of the same group. By sending goods from one company to another, B2B (Business to Business) was shown and then another company of the same group sold it to common customers and converted it to B2C (Business to Customer). Its aim was to show the legally 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 group of its group only 25%. But Minyantra sold 100% goods to his own group company vector, which is a direct violation of the law.
In this way, Mantra and its associated companies have violated Section 6 (3) (b) and FDI policies (01.04.2010 and 01.10.2010). For this reason, ED has filed a complaint before the Justice Authority under Section 16 (3) of FEMA.
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