On Saturday, the Enforcement Directorate announced that it had seized $5,551.27 crore from Xiaomi Technology India Pvt Ltd, a ‘wholly-owned subsidiary of the China-based Xiaomi group’, under the Foreign Exchange Management Act of 1999. The money was seized in February in connection with alleged ‘illegal outward remittances’ in bank accounts belonging to the Chinese smartphone giant, according to the investigation agency.
“Xiaomi India is a wholly-owned subsidiary of the Xiaomi Group, based in China. The Enforcement Directorate seized the money from the company’s bank accounts, totaling Rs 5,551.27 crore “In a statement, the agency said.
“Under the guise of royalty, the company has remitted foreign currency equivalent to 5,551.27 crore to three foreign based entities, one of which is a Xiaomi group entity,” the ED said. According to the ED, such large sums in the name of royalties were remitted on the orders of Chinese “parent group” entities.
According to the ED, Xiaomi India receives fully assembled mobile phones and other products from Indian manufacturers, but has not received any services from the three foreign-based entities to whom the funds were transferred.
“Under the cover of various unrelated documentary façades created amongst the group entities, the company remitted this amount in the guise of royalty abroad, which is a violation of section 4 of the FEMA,” according to the agency.
Xiamoi has also been accused of giving banks “misleading information” when remitting money overseas.
It had summoned former India managing director Manu Kumar Jain for questioning. Reuters reached out to Jain and the agency for comment, but neither responded.
According to Reuters, Xiaomi complies with all Indian laws and is “fully compliant with all regulations.” “We’re working with authorities on their ongoing investigation to make sure they have all of the information they need.”
The ED is investigating existing business structures between Xiaomi India, contract manufacturers, and the parent entity in China, according to a Reuters report.
According to Reuters, fund flows between Xiaomi India and its parent company are being scrutinised, including royalty payments.
Xiaomi was India’s top smartphone seller in 2021, with a 24% market share.
