ED closes FEMA probe against Myntra

A FEMA investigation against Flipkart-backed online fashion-and-lifestyle platform Myntra has been “terminated” after the RBI issued a compounding order on the basis of a “no objection” given by the Enforcement Directorate (ED). The Reserve Bank of India (RBI) issued the order on April 20 in the case of Myntra Designs Private Limited, the ED said in a statement.

The central agency had initiated a probe against the e-commerce platform last year for alleged contraventions of the Foreign Exchange Management Act (FEMA), based on “credible” information.

A compounding order in the regulatory context means a formal decision taken by an authority to settle an offence by allowing the defaulter to pay a monetary penalty instead of facing prosecution.

The agency was probing the company for two alleged contraventions of the FEMA covering transactions worth about Rs 46 crore. Myntra, according to the ED, made a one-time payment of Rs 2.88 lakh to get the case compounded or closed.

Compounding is a provision available in the FEMA and the ED has been promoting this provision since last year in the spirit of “ease of doing business” and as a measure to reduce litigation.

“The case was under investigation while the company filed an application before the RBI for compounding of the said contraventions under FEMA as per the provisions of section 15 of the Act. “On reference from RBI, the ED issued no objection for such compounding in line with the true spirit of the Act,” the federal agency said.

Accordingly, the RBI, on the basis of the no objection issued by the ED, has compounded the said contraventions vide compounding order dated April 20 with a one-time payment of Rs 2.88 lakh, the agency added.

Founded in 2007, Myntra is part of the Flipkart Group, owned by Walmart.