Xiaomi’s Rs 5,551 crore deposits seized by India’s ED

The Enforcement Directorate said on Saturday it has seized funds worth over Rs 5,551 crore of Xiaomi India for violating the Indian foreign exchange law.
Xiaomi China shopChina based mobile manufacturing company Xiaomi India is a trader and distributor of mobile phones in the country under the brand name of MI, PTI reported.

Xiaomi is one of the leading smartphone brands in India.

Xiaomi India is wholly owned subsidiary of China-based Xiaomi group. This amount of Rs 5,551.27 crore lying in the bank accounts of the company has been seized by the Enforcement Directorate, the agency said in a statement.

The seizure of funds has been done under relevant sections of the Foreign Exchange Management Act (FEMA) after a probe was launched by the federal agency against Xiaomi India in connection with alleged illegal remittances sent abroad by the Chinese company in February.

Xiaomi started its operations in India in 2014 and started remitting the money from the next year. The company has remitted foreign currency equivalent to Rs 5,551.27 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 were for the ultimate benefit of the Xiaomi group entities.

While Xiaomi India procures mobile sets and other products from the manufacturers in India, it has not availed any service from these three foreign based entities to whom such amounts have been transferred.

“Under the cover of various unrelated documentary facade created amongst the group entities, Xiaomi India remitted this amount in guise of royalty abroad which constitute violation of section 4 of the FEMA.

The said section of the civil law of FEMA talks about holding of foreign exchange. The ED accused Xiaomi India of providing misleading information to the banks while remitting the money abroad.

Earlier this month, the ED had also questioned Manu Kumar Jain, global vice president of Xiaomi India group, at the agency’s regional office in Bengaluru, Karnataka.