ED seizes Rs. 5,551 crore from Xiaomi for foreign exchange violations

Hyderabad: The directorate of enforcement (ED) has seized Rs. 5,551.27 crore of Xiaomi Technology India Private Limited under the provisions of the Foreign Exchange Management Act 1999 (FEMA). Xiaomi India is a wholly-owned subsidiary of China-based Xiaomi group.

ED had initiated an investigation in connection with the illegal remittances made by the company in the month of February this year.

According to ED, the company started its operations in India in 2014 and started remitting the money from 2015. 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 the other two US-based unrelated entities was also for the ultimate benefit of the Xiaomi group entities, ED said.

Xiaomi India is a trader and distributor of mobile phones in India under the brand name MI. Xiaomi India procures completely manufactured mobile sets and other products from manufacturers in India. Xiaomi India has not availed any service from the three foreign-based entities to whom such amounts have been transferred, according to ED.

It further said that under the cover of various unrelated documentary facade created amongst the group entities, the company remitted this amount in the guise of royalty abroad which constitutes a violation of Section 4 of the FEMA. The company also provided misleading information to the banks while remitting the money abroad.