ED seizes Rs 5,551 crore of Xiaomi India under FEMA law

Xiaomi India is a wholly owned subsidiary of the China-based Xiaomi group. According to the ED, the seized amount was lying in the bank accounts of the company. The ED had initiated an investigation in connection with the illegal remittances made by the company in the month of February this year.

Earlier this month, the agency had questioned Manu Kumar Jain, Xiaomi’s global vice-president, in connection with the case.

In a statement, ED said, “The company started its operations in India in the year 2014 and started remitting the money from the year 2015. The company has remitted foreign currency equivalent to INR 5551.27 crore to three foreign based entities which include one Xiaomi group entity in the guise of Royalty. Such huge amounts in the name of Royalties were remitted on the instructions of their Chinese parent group entities. The amount remitted to other two US based unrelated entities was also for the ultimate benefit of the Xiaomi group entities.”

According to ED, Xiaomi India is a trader and distributor of mobile phones in India under the brand name of MI.

ED has seized Rs.5551.27 Crore of M/s Xiaomi Technology India Private Limited lying in the bank accounts under the provisions of Foreign Exchange Management Act, 1999 in connection with the illegal outward remittances made by the company.

— ED (@dir_ed) April 30, 2022

“Xiaomi India procures completely manufactured mobile sets and other products from the manufacturers in India. The Xiaomi India has not availed any service from the three foreign based entities to whom such amounts have been transferred. Under the cover of various unrelated documentary façade created amongst the group entities, the company remitted this amount in the guise of Royalty abroad which constitutes violation of Section 4 of the FEMA. The company also provided misleading information to the banks while remitting the money abroad,” the ED statement said.

Reacting to the development, Xiaomi said it was fully compliant with the local laws. “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,” a Xiaomi spokesperson said.