Updated: May 1, 2022 9:07:33 am
The Enforcement Directorate (ED) Saturday announced it had seized more than Rs 5,500 crore in assets from the Indian subsidiary of Chinese smartphone maker Xiaomi, saying it had made illegal remittances to foreign entities and shown them as royalty payments.
The agency said it had seized the sum from the bank accounts of Xiaomi Technology India Pvt. Ltd, a wholly-owned subsidiary of Xiaomi Inc., under the Foreign Exchange Management Act (FEMA), 1999.
— Xiaomi India (@XiaomiIndia) April 30, 2022
It said the subsidiary had been making remittances to three foreign entities — one of which was a Xiaomi entity — “on the instructions” of its Chinese parent.
The ED has been probing the electronics company since February over alleged forex violations. It had also questioned Xiaomi’s Global Vice President Manu Kumar Jain on April 13. Jain was earlier Xiaomi’s India head.
A Xiaomi spokesperson said in a statement: “As a brand committed to India, all our operations are firmly compliant with local laws and regulations.”
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
“We have studied the order from government authorities carefully. We believe our royalty payments and statements to the bank are all legit and truthful,” the statement said.
The ED statement read: “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 other two US based unrelated entities was also for the ultimate benefit of the Xiaomi group entities.”
Xiaomi India distributes mobile phones in India under the Mi brand.
“Xiaomi India procures completely manufactured mobile sets and other products from the manufacturers in India. Xiaomi India has not availed any service from the three foreign based entities to whom such amounts have been transferred. Under the cover of various unrelated documentary façade 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,” the agency’s statement said.
The Xiaomi statement said: “These royalty payments that Xiaomi India made were for the in-licensed technologies and IPs used in our Indian version products. It is a legitimate commercial arrangement for Xiaomi India to make such royalty payments. However, we are committed to working closely with government authorities to clarify any misunderstandings.”
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