The Law Enforcement (ED) Directorate announced on Saturday that it had seized more than Rs 5,500 crore in assets from the Indian subsidiary of Chinese smartphone maker Xiaomi, claiming it had made illegal payments to foreign entities and presented them as royalty payments.
The agency said it 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 of 1999 (FEMA).
He said the subsidiary sent remittances to three foreign entities – one of which was a Xiaomi entity – “on the instructions” of its Chinese parent company.
The ED has been investigating the electronics company since February over alleged forex violations. He had also interviewed Xiaomi’s global vice president, Manu Kumar Jain, on April 13. Jain was previously the Indian director of Xiaomi.
A Xiaomi spokesperson said in a statement, “As a committed brand in India, all of our operations strictly comply with local laws and regulations.”
ED seized Rs.5551.27 Crore from M/s Xiaomi Technology India Private Limited which was in the bank accounts under the provisions of the Foreign Exchange Management Act 1999 in relation to illegal funds transfers made by the company.
— ED (@dir_ed) April 30, 2022
“We have carefully studied the order from the government authorities. We believe that our royalty payments and statements to the bank are all legitimate and truthful,” the statement read.
The ED statement read, “The company commenced operations in India in 2014 and started remitting money from 2015. The company remitted foreign currency equivalent to Rs 5,551.27 crore to three overseas-based entities, including one Xiaomi Group entity under royalty cover. . These huge sums in the name of royalties were paid on the instructions of the Chinese entities of their parent group. The amount paid to two other independent US-based entities was also for the ultimate benefit of Xiaomi Group entities.
Xiaomi India distributes mobile phones in India under the Mi brand.
“Xiaomi India purchases fully manufactured mobile sets and other products from manufacturers in India. Xiaomi India did not receive any service from the three overseas-based entities to which these amounts were transferred. Under cover of various independent documentary facades created between group entities, the company remitted this amount under the guise of a royalty abroad, which is a violation of FEMA Article 4. The company also provided misleading information to banks during transferring money overseas,” the agency’s statement said.
Xiaomi’s statement said, “These royalty payments made by Xiaomi India related to licensed technologies and IPs used in our Indian version products. It is a legitimate business agreement for Xiaomi India to make such royalty payments. However, we are committed to working closely with government authorities to clarify any misunderstandings. »
CONTRIBUTIONS OF THE ENS ECONOMIC OFFICE