JOIN USED seizes Rs 5.5K cr from Xiaomi under FEMA provisions
The Enforcement Directorate (ED) has seized funds worth Rs 5551.27 crore owned by Chinese mobile manufacturing company Xiaomi India for violating the Indian foreign exchange law.
The action has been taken against Xiaomi Technology India Private Limited, which is a trader and distributor of mobile phones in the country under the brand name 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," a statement said.
The global vice president of the group, Manu Kumar Jain, was questioned by the ED at the agency's regional office in Bengaluru earlier this month.
Xiaomi India is a wholly-owned subsidiary of a China-based Xiaomi group. The seizure of assets came following investigations by the ED against Xiaomi in connection with alleged "illegal remittances" sent abroad by the Chinese firm in February.
Xiaomi, which started its operations in India in 2014 and started remitting the money in 2015, had remitted Rs 5,551.27 crore to three foreign-based entities -- which include one Xiaomi group entity and two United States-based unrelated entities, "in the guise of royalty".
This was remitted as royalties on the instructions of the "parent group" entities, the ED said. The amount remitted to two US-based entities was also for the ultimate benefit of the Xiaomi group entities.
While Xiaomi India procures completely manufactured mobile sets and other products from the manufacturers in India, the ED said, it has not availed any service from these three entities to whom such amounts have been 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 while accusing it of providing "misleading information" to the banks while remitting the money abroad.
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