The Enforcement Directorate (ED) on Saturday seized Rs 5551.27 crore of telecom firm Xiaomi India lying in their bank accounts under the provisions of Foreign Exchange Management Act, (FEMA) 1999, in connection with the illegal outward remittances made by the company, the probe agency said in a press release.
In February this year, the ED had initiated an investigation over the alleged illegal remittances made by M/s Xiaomi Technology India Private Limited — a wholly owned subsidiary of China based Xiaomi group. “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,” it said.
“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 were also for the ultimate benefit of the Xiaomi group entities,” the ED added.
“The amount remitted to other two US-based unrelated entities were also for the ultimate benefit of the Xiaomi group entities,” the ED said.
It also said while Xiaomi India procures completely manufactured mobile handsets and other products from the manufacturers in India, it has not taken any service from these three foreign-based entities to whom the amounts were transferred. “Under the cover of various unrelated documentary facade created amongst the group entities, the company remitted this amount in guise of royalty abroad which constitute violation of section 4 of the FEMA,” it said. The said section of the civil law of FEMA talks about “holding of foreign exchange.”
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
The ED also accused Xiaomi India of furnishing “misleading information” to the banks while remitting the money abroad.
Earlier this month, the ED had summoned Xiaomi’s global vice president Manu Kumar Jain for questioning in the case related to alleged violations of the foreign exchange law by the company. Sources said Jain was asked to furnish a number of financial documents linked to the company. These include documents related to Xiaomi’s shareholding, source of funds, vendor contracts, and payments made to Indian management and sent abroad.