ED seizes Xiaomi's Rs 5,551 crore assets over forex violations

Enforcement Directorate (ED) on Saturday seized over Rs 5,500 crore from Chinese smartphone giant Xiaomi over violations of the Indian foreign exchange law. The action has been taken against Xiaomi Technology India Private Limited. The company is a trader and distributor of mobile phones in the country under the brand name MI. The ED seized Rs 5,551.27 crore from the bank accounts of the company under the provisions of the Foreign Exchange Management Act, 1999. "Such huge amounts in the name of royalties were remitted on the instructions of their Chinese parent group entities," the ED said. The amount remitted to the other two US-based unrelated entities was also reportedly for the ultimate benefit of the Xiaomi group entities.

Meanwhile, Xiaomi issued a statement on Saturday  and  said as a brand committed to India, all its operations are “firmly compliant with local laws and regulations.” “We 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. However, we are committed to working closely with government authorities to clarify any misunderstandings,” the statement said. 

Xiaomi started its operations in India in 2014 and started remitting the money from the next year, "The amount remitted to other two US-based unrelated entities were also for the ultimate benefit of the Xiaomi group entities," the ED said. The agency said while Xiaomi India procures completely manufactured mobile sets and other products from the manufacturers in India it has not availed any service from these three foreign-based entities to whom such amounts have been transferred. "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," it said.