The Enforcement Directorate said on Saturday that Chinese mobile manufacturing company Xiaomi India’s funds worth over Rs 5,551 crore have been “confiscated” for violating the Indian Foreign Exchange Act. Action has been taken against Xiaomi Technology India Private Limited. The company (also known as Xiaomi India) is a trader and distributor of mobile phones in the country under the brand name MI.
“Xiaomi India is a wholly owned subsidiary of the China-based Xiaomi Group. An amount of Rs 5,551.27 crore lying in the bank accounts of the company has been seized by the Enforcement Directorate. In February an investigation was launched by the federal agency against the company in relation to alleged “illegal remittances” sent abroad by the Chinese firm.
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Xiaomi started its operations in India in 2014 and started sending money from next year. “The company has remitted foreign currency equivalent to Rs 5,551.27 crore in the guise of royalty to three foreign entities, including a Xiaomi group entity,” the ED said. Such a huge amount in the name of royalty was sent on his instructions. Chinese “parent group” entities, it alleged. “The amount remitted to the other two unrelated entities based in the US was also for the ultimate benefit of the entities of the Xiaomi group,” the ED said.
It said that Xiaomi India buys completely manufactured mobile sets and other products from manufacturers in India, but has not taken any service from these three foreign based entities to whom such an amount has been transferred. It said, “In the guise of various unrelated documentary aspects created between the entities of the group, the company remitted this amount under the guise of royalty abroad, which is in contravention of Section 4 of FEMA.” The said section of FEMA’s civil law talks about “holding foreign currency.” The ED also accused the company of giving “misleading information” to banks while remitting money abroad.
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Earlier this month, the ED had also questioned the group’s global vice president Manu Kumar Jain at the agency’s regional office in Bengaluru, Karnataka.
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