A competent authority under the Foreign Exchange Management Act (FEMA) has confirmed the Enforcement Directorate's seizure of ₹5551.27 crore Chinese company Xiaomi Technology India Private Limited had illegally wired abroad over a period of time from 2015 onwards under the garb royalty payback.

The ED had passed the order on May 29 to attach the Xiaomi's amount under the Section 37A of FEMA. The agency stated in a statement that this is the highest amount of seizure order in India which has been confirmed by the Authority till date.

"The Authority held that ED is right in holding foreign exchange equivalent to Indian ₹5,551.27 crore has been transferred out of India by the Xiaomi India in an unauthorised manner" which is in contravention of section 4 of the FEMA, said the agency.

Payment of royalty

The competent authority also observed that payment of royalty is nothing, but a tool to transfer the foreign exchange out of India and the same is in blatant violation of provisions of FEMA, stated the ED. The confiscated amount was lying in its bank accounts.

Xiaomi India, a wholly owned subsidiary of China based Xiaomi group, had challenged the ED's decision in a writ petition filed before the High Court of Karnataka but it was dismissed via an order delivered on July 7. The sleuths had initiated investigation in connection with the illegal remittances made by the mobile trading company in the month of February this year.

Illegal transfer

Xiaomi began its India operations from 2014 and started remitting the money a year year later. It wired ₹5,551.27 crore to three foreign based entities including a Xiaomi group entity in the guise of royalty, said the ED. The other two US-based unrelated entities were also for the ultimate benefit of the Xiaomi group entities, charged the agency. The illegal transfer of money outside the country to the three companies which never did any business with Xiaomi India were done on the instructions of their Chinese parent group entities, suspected the ED. The Chinese company, pointed out the agency, also provided misleading information to the banks while remitting the money abroad.

The Xiaomi India procures completely manufactured mobile sets from India and sells them under the brand name of 'MI'.

social-fb COMMENT NOW