Xiaomi in alleged Foreign Exchange Violation Case, ED seizes ₹5551 crores ($725 million)

Xiaomi's 5551 crores seized by ED over foreign exchange violation

The Chinese mobile manufacturing company, which operates in India as Xiaomi India has come under the radar of the Enforcement Directorate (ED) in an alleged Foreign Exchange Violation. The ED has seized ₹ 5551 ($725 million) crores from Xiaomi India.

“Xiaomi India is a wholly-owned subsidiary of the China-based Xiaomi group. This amount of Rs. 5,551.27 crore lying in the bank accounts of the company has been seized by the Enforcement Directorate,” the agency said in a statement.

The probe against them started with the company’s connection with “illegal remittances” sent abroad. Xiaomi, which started its operation in India in 2014 has been said to send remittances starting a year later.

The ED has said that the company has remitted foreign currency equivalent to Rs. 5,551.27 crore to three foreign-based entities which include one Xiaomi group entity, in the guise of royalty. The remittances in huge amounts were sent to three foreign entities, including two based in the US, on the instructions from the “parent group”.

The ED alleges that Xiaomi hasn’t taken any services from these three entities to whom the money has been sent.

Under the cover of various unrelated documentary facade created amongst the group entities, the company remitted this amount in guise of royalty abroad which constitute violation of section 4 of the FEMA.

In the latest development, Xiaomi India has defended itself saying that its documents, bank statements and payments are all legit. A spokesperson from Xiaomi said that they have studied the order from government authorities carefully.

“We believe our royalty payments and statements to the bank are all legit and truthful. These royalty payments that Xiaomi India made were for the in-licensed technologies and IPs used in our Indian version products. It is a legitimate commercial arrangement for Xiaomi India to make such royalty payments”, said the spokesperson.

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