ED Seizes Rs. 5,551 Crore Assets from Xiomi’s Bank Accounts Over Forex Breach
The Enforcement Directorate (ED) of the Indian government seized about Rs 5,500 crore from Xiaomi, a Chinese smartphone company, for violating Indian foreign exchange laws. Xiaomi Technology India Private Limited is the target of the action. However, the company claims that all of its operations are “fully compliant” with local laws and regulations.
The company (also known as Xiaomi India) is a mobile phone merchant and distributor in India under the MI brand.
Under the provisions of the Foreign Exchange Management Act, 1999, the ED seized $5,551.27 crore from the company’s bank accounts.
Soon after the news came, Trinamool Congress MP Mahua Moitra slammed the Centre, claiming that Xiaomi was permitted to donate Rs. 10 crore to the “opaque” PM CARES fund and that her party’s questions in Parliament were “stonewalled.”
ED siezes ₹ 5,500 crore assets from Chinese smartphone giant Xiaomi over Forex law violations.
Same Xiaomi allowed to donate ₹10cr to opaque PMCARES fund.
All our questions in parliament were stonewalled!
— Mahua Moitra (@MahuaMoitra) April 30, 2022
The central investigative agency had opened an investigation into the company’s “illegal remittances” in February of this year.
In 2014, the company began operations in India, and in 2015, it began remitting funds. According to the investigating agency, it has remitted foreign currency equivalent to Rs 5,551.27 crore to three foreign-based organisations, one of which is a Xiaomi group entity, under the premise of royalty.
“Such huge amounts in the name of royalties were remitted on the instructions of their Chinese parent group entities,” the ED said. The amount remitted to the other two US-based unrelated entities was also reportedly for the ultimate benefit of the Xiaomi group entities.
Xiaomi has claimed that all its royalty payments are “legit and truthful”.
“We have studied the order from government authorities carefully. We believe our royalty payments and statements to the bank are all legit and truthful. These royalty payments that Xiaomi India made were for the in-licensed technologies and IPs used in our Indian version products,” it said in a statement.
Under the brand name MI, Xiaomi India is a trader and distributor of mobile phones in India. It purchases fully assembled mobile phones and other products from Indian producers. The ED stated, “It has not received any service from the three foreign-based entities to whom such amounts have been transferred.”
The corporation transmitted this sum in the pretext of royalty abroad under the cover of multiple unrelated documentary facades built among the group entities, which is a breach of Section 4 of the FEMA.
The civil law section in question refers to “holding of foreign exchange.” The ED also charged the corporation with giving banks “misleading information” while remitting money abroad.