AUTHOR: P. NAGA LASYA SRI, CHRIST ACADEMY INSTITUTE OF LAW
ABSTRACT
The 2025 Myntra E-commerce scam highlights the relationship of regulatory noncompliance and consumer fraud in digital India. ED’s FEMA case highlights the risks of indirect MBRT operations disguised as wholesale trade in the face of tight FDI prohibitions. At the same time, widespread abuse of refund rules and fraudulent transactions cost Myntra a lot of money and damaged its reputation. These findings highlight the critical legal, operational, and technological interventions required to protect e-commerce from statutory breaches and cyber manipulation.
TO THE POINT
The 2025 Myntra scam crisis includes two parallel issues:
- An alleged violation of Foreign Direct Investment (FDI) guidelines by misrepresenting multi-brand retail as wholesale company has resulted in an Enforcement Directorate (ED) inquiry for ₹1,654 crore in FEMA offenses.
- Scammers used Myntra’s customer-friendly procedures to create losses of over ₹50 crore across the country by filing fraudulent complaints and misusing the return system.
THE PROOF
The Enforcement Directorate filed accusations against Myntra (and related entities, most notably Vector E-Commerce Pvt. Ltd.) for passing all transactions through a single subsidiary, who then made retail sales to Indian consumers, masking MBRT as wholesale activity.
Myntra’s yearly FDI inflow of ₹1,654 crore was routed under the scheme of wholesale commerce, while ED found 100% of goods were sold to Vector E-Commerce, violating the 25% cap.
Over 5,500 fake orders were found in Bengaluru, resulting in a loss of ₹1.1 crore. Fraudsters used manufactured complaints to demand repayments for undelivered or mismatched products.
A different “Festival Gifts” fraud also targeted Myntra users with bogus prize offers, threatening data privacy through misleading mobile surveys.
USE OF LEGAL JARGON
Multi-Brand Retail Trading (MBRT) is the direct sale of different brands to consumers, as regulated by India’s FDI policy.
Wholesale Cash & Carry Model: A legal structure that allows foreign investment but is subject to harsh compliance requirements.
Section 6(3)(b) of FEMA, 1999 governs authorized FDI routes and operational structures, including the prohibition of some forms of direct-to-consumer retail by foreign-backed enterprises.
Section 16(3) of FEMA, 1999: Addresses adjudication and penalties for violations of foreign exchange laws.
The legal gap between business-to-business (B2B) and business-to-consumer (B2C) is crucial for FDI and FEMA compliance.
Fraudulent Misrepresentation and Cybercrime: Important ideas for dealing with refund and phishing scams under the Information Technology Act and the Bharatiya Nyaya Sanhita (BNS).
CASE LAWS
Case Name
Principle Established
Relevance to Myntra Scam
Foreign Exchange Management Act compliance – Amazon/Flipkart cases (ED probes, 2022-23)
ED’s powers and FDI guidelines enforcement
Sets regulatory background for current action against Myntra
P.V. Ramana v. Central Bureau of Investigation (SC, 2019)
Defines “fraudulent misrepresentation” for cyber and e-commerce offences
Applicable to refund fraud scenario
Shreya Singhal v. Union of India (SC, 2015)
Scope of liability under IT Act for intermediaries
Implications for Myntra’s platform and consumer protection duties
FEMA Adjudication – Flipkart Internet Pvt Ltd v. Union of India (2023, DHC)
Interpretation of Section 6(3)(b) FEMA
Illuminates direct sale v. wholesale structuring
CONCLUSION
The Myntra e-commerce crisis in 2025 reveals major weaknesses at the junction of regulation and operational practice in India’s digital retail sector. The FEMA and FDI breach case against Myntra set a precedent for detecting covert MBRT via group agents, while systemic refund fraud and phishing highlight the importance of strong internal controls and compliance. These instances have fueled requests for clearer regulatory frameworks and more effective enforcement tools to protect consumers and ensure fair competition.
FAQ
Q1: What exactly is Myntra accused of in the ED investigation?
A: Myntra is accused of breaking FEMA by misrepresenting multi-brand retail as wholesale trading, channeling all sales through a group entity, and accepting foreign investment in violation of FDI regulations.
Q2: How did scammers use Myntra’s refund system?
A: Scammers placed large orders, claimed bogus shortages or wrong deliveries, and received refunds without sufficient verification, resulting in losses of ₹50 crore.
Q3: Which legal provisions are triggered by these allegations?
A: Important statutes include Sections 6(3)(b) and 16(3) of FEMA 1999, relevant parts of India’s FDI policy, the Information Technology Act, and fraud-related sections of the Bharatiya Nyaya Sanhita.
Q4: How does this impact consumer faith in e-commerce platforms?
A: Yes, incidents like this destroy customer trust and highlight weaknesses in regulatory compliance and operational safeguards, leading to calls for reform and increased security.
Question 5: Has Myntra responded to the legal allegations?
A: Myntra has declared its willingness to cooperate with the authorities, but has yet to provide a substantive response pending receipt of official complaint materials.
