Myntra, SIMPL under ED scanner for suspected FEMA breaches totalling ₹2,567 crore
The central agency claimed that the investigations were initiated based on credible information that Myntra and its linked companies were doing multi-brand retail trade in the guise of wholesale cash and carry, allegedly in violation of the extant FDI policy.
According to the ED, Myntra had declared that they engaged in wholesale cash and carry business, inviting and receiving funds from FDI to the tune of ₹ 1,654 crore. The ED alleged that Myntra sold majority of their goods to Vector E-commerce Pvt. Limited, a company that sold goods in retail to the customers. Vector is a company under the group that also owns Myntra.
The Central Agency said that Vector was created and continued as a corporate entity to bifurcate Business to Customer (B2C) transactions (Myntra to customers) into Business to Business (Myntra to Vector) and then B2C (Vector to Myntra). ED alleged that Myntra has violated conditions laid for wholesale or cash and carry trading, which permit only 25% of sales to companies of the same groups and group companies.
Myntra and other companies have allegedly contravened the provisions as per FEMA, 1999, and the consolidated FDI policy dated April and October 2010, to the tune of ₹1,654 crore.
Reacting to the allegations, a Myntra spokesperson said that they are deeply committed to upholding all applicable laws of the land and operating with the highest standards of compliance and integrity.
'By working closely with Indian brands and sellers, artisans, and weavers, we have helped bring traditional craftsmanship to a global audience, particularly among the Indian diasporas. In doing so, we've strengthened the industry's digital backbone and created large-scale employment and entrepreneurship opportunities across the country. While we have not received a copy of the subject complaint and the supporting documents from the authorities, we remain fully committed to cooperating with them at any point in time,' the spokesperson said.
Meanwhile, in a separate case, the ED said that they booked One Sigma Technologies Pvt. Ltd. (SIMPL), under FEMA and its director, Nithya Nand Sharma, for alleged contravention to the tune of ₹ 913.75 crore.
'The enquiries were initiated on the basis of credible information that One Sigma Technologies Pvt. Ltd. (SIMPL) has received a substantial amount of Foreign Direct Investment (FDI) from the United States of America, allegedly in violation of the extant FDI Policy,' the ED said.
'One Sigma Technologies Pvt. Ltd. runs its business through a mobile application named SIMPL. It provides Buy Now Pay Later services, which allow its customers to buy now and pay later in instalments,' ED said.
'It was learnt that One Sigma Technologies Pvt. Ltd. received FDI to the tune of ₹648 crore and issued convertible notes to the tune of ₹ 264 crore under the 100% automatic route by declaring its business activity as 'benefits of information technology and other computer service activities,' said the ED.
The allegations are that the company received FDI under the automatic route and issued convertible notes under the automatic route without obtaining prior approval from the Government of India.
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