ED seizes Rs 5,551 crore from Xiaomi bank accounts for Forex breach
Funds worth more than Rs 5,551 crore from Chinese mobile phone maker Xiaomi India have been “seized” for breaching India’s foreign exchange law, the Enforcement Directorate said on Saturday. laws.
The action was brought against Xiaomi Technology India Private Limited. The company (also called Xiaomi India) is a mobile phone trader and distributor in the country under the MI brand.
“Xiaomi India is a 100% subsidiary of the Chinese group Xiaomi. This amount of Rs 5,551.27 crore found in the bank accounts of the company has been seized by the Enforcement Department,” the agency said in a statement.
In a statement provided to FE Online regarding ED’s move, a Xiaomi spokesperson said, “As a committed brand in India, all of our operations strictly comply with local laws and regulations. We have carefully studied the order of the government authorities. We believe that our royalty payments and statements to the bank are all legitimate and truthful. These royalty payments made by Xiaomi India were for licensed technologies and IP addresses used in our Indian country.
release products. It is a legitimate business agreement for Xiaomi India to make such royalty payments. However, we are committed to working closely with government authorities to clarify any misunderstandings. »
The seizure of the funds was made under relevant sections of the Foreign Exchange Management Act (FEMA) after an investigation was launched by the federal agency against the company in connection with alleged “illegal remittances” sent overseas by the Chinese company in February.
Xiaomi began operations in India in 2014 and started handing over the money from the following year, he said.
“The company paid foreign currency equivalent to Rs 5,551.27 crore to three overseas-based entities, including a Xiaomi Group entity, under the guise of a fee,” the ED said.
Such huge sums in the name of royalties were paid on the instructions of their Chinese “parent group” entities, he alleged.
“The amount paid to two other unrelated US-based entities was also for the ultimate benefit of Xiaomi Group entities,” the ED said.
He said that although Xiaomi India purchases fully manufactured mobile devices and other products from manufacturers in India, it has not benefited from any services from these three overseas-based entities to which these amounts have been transferred.
“Under the guise of various independent documentary facades created between group entities, the company has remitted this amount under the guise of overseas royalties, which is a violation of FEMA Section 4,” it said. he declares.
The said Civil Law Section of FEMA speaks of “holding foreign currency”. The ED also accused the company of providing “misleading information” to banks while moving the money overseas.
Earlier this month, the ED also interviewed the group’s global vice president, Manu Kumar Jain, at the agency’s regional office in Bengaluru, Karnataka.