A Foreign Exchange Management Act (FEMA) investigation against the Flipkart-backed online fashion-and-lifestyle platform Myntra has been terminated after the Reserve Bank of India (RBI) issued a compounding order based on a “no objection” provided by the Enforcement Directorate (ED).
The Enforcement Directorate stated in a statement that the RBI issued the order on 20th April in the case of Myntra Designs Private Limited.
The central agency had initiated a probe against the e-commerce platform in July last year based on what it described as “credible” information regarding alleged contraventions of FEMA.
At the time, the ED had registered a case against Myntra, its associated companies, and directors for an alleged foreign direct investment (FDI) violation exceeding Rs. 1,654 crore (US $173 million).
However, the investigation ultimately focused on two alleged FEMA contraventions involving transactions worth approximately Rs. 46 crore (US $4.81 million).
According to the ED,while the case was under investigation, Myntra filed an application with the RBI seeking compounding of the alleged contraventions under Section 15 of FEMA.
Compounding is a legal mechanism under FEMA that allows certain violations to be settled through a monetary payment, thereby avoiding prolonged litigation.
Based on the ED’s no-objection certificate, the RBI compounded the alleged contraventions through its order dated 20th April. As part of the settlement, Myntra made a one-time payment of Rs 2.88 lakh (US $3017.38) to close the case.
The ED further noted that it has been promoting the use of FEMA’s compounding provisions since last year as part of the Union government’s ease-of-doing-business initiative and to help reduce litigation.
