Xiaomi India case: FEMA authority confirms ED’s seizure order of ₹5,551.27 crore

The agency said it was the highest ever seizure amount-related order confirmed till date

September 30, 2022 07:51 pm | Updated 07:51 pm IST - NEW DELHI

In this representational photo, the Xiaomi logo is seen at a Xiaomi shop. File

In this representational photo, the Xiaomi logo is seen at a Xiaomi shop. File | Photo Credit: Reuters

The competent authority appointed under the Foreign Exchange Management Act (FEMA) has confirmed the seizure order of ₹5,551.27 crore issued by the Enforcement Directorate (ED) against Xiaomi Technology India Private Limited on April 29.

A response from the company to the development is awaited.

Stating that it was the highest ever seizure amount-related order confirmed till date, the ED said, “The authority, while confirming the seizure..., held that the ED is right in holding [that] foreign exchange equivalent to ₹5,551.27 crore has been transferred out of India by Xiaomi India in an unauthorised manner and is held outside India on behalf of the group entity in contravention of Section 4 of the FEMA...”

“The competent authority also observed that payment of royalty is nothing but a tool to transferring the foreign exchange out of India and the same is in blatant violation of provisions of FEMA,” said the agency.

Earlier, the ED had seized the amount lying in the bank accounts of Xiaomi Technology India under the Act. The agency has alleged that the company remitted the amount without any authorisation, in the guise of royalties abroad.

“Xiaomi India also filed a writ petition before the High Court of Karnataka against the said order which was dismissed by the High Court vide an order dated July 5. Xiaomi India is a wholly-owned subsidiary of China-based Xiaomi group... the ED had initiated investigation in connection with the illegal remittances made by the company in the month of February this year,” it said.

According to the ED, the company had launched its operations in India in 2014 and started remitting the money from 2015. It had sent foreign currency equivalent to ₹5,551.27 crore to three overseas entities, including one Xiaomi group entity. The amounts remitted to the two other U.S.-based unrelated entities were also for the ultimate benefit of the group’s concerns, as alleged.

The agency further alleged that Xiaomi India had not availed itself of any service from the three entities to which the funds were transferred.

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