The Enforcement Directorate has seized ₹5,551.27 crore of Xiaomi Technology India Private Limited under the provisions of the Foreign Exchange Management Act (FEMA), in connection with the alleged illegal remittances made by the company.
Xiaomi India is wholly owned subsidiary of China–based Xiaomi group. “This amount was lying in the bank accounts of the company,” said an official.
According to the ED, the company launched its operations in India in 2014 and started remitting the money from next year. It sent foreign currency equivalent to ₹5,551.27 crore to three foreign–based entities, which include one Xiaomi group entity, in the guise of royalties.
“Such huge amounts in the name of royalties were remitted on the instructions of their Chinese parent group entities. The amounts remitted to the other two U.S.–based unrelated entities were also for the ultimate benefit of the Xiaomi group entities,” the agency alleged.
Xiaomi India is a trader and distributor of mobile phones in India under the brand name of MI. It procures the completely manufactured mobile sets and other products from the manufacturers in India; and has not taken any service from the three foreign–based entities to which such amounts were transferred, said the ED.
The agency alleged that under the cover of various unrelated documentary façade created among the group entities, the company sent the amounts overseas in violation of the FEMA. “The company also provided misleading information to the banks while remitting the money abroad,” it said. The ED had initiated the FEMA inquiry in February.
All legit and truthful, says company
Reacting to the development, a Xiaomi spokesperson said: “As a brand committed to India, all our operations are firmly compliant with local laws and regulations. We have studied the order from government authorities carefully. We believe our royalty payments and statements to the bank are all legit and truthful. These royalty payments that Xiaomi India made were for the in–licensed technologies and IPs used in our Indian version products. It is a legitimate commercial arrangement for Xiaomi India to make such royalty payments. However, we are committed to working closely with government authorities to clarify any misunderstandings.”