Xiaomi’s Rs 5,551 Crore Assets Seized Over Forex Breaches: Probe Agency

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Xiaomi India is a mobile phone trader and distributor in India under the MI brand.

New Delhi:

The Central Polling Agency’s Law Enforcement (ED) Directorate today seized more than Rs 5,500 crore from Chinese smartphone giant Xiaomi for violating India’s foreign exchange law. The action was brought against Xiaomi Technology India Private Limited. The company (also called Xiaomi India) is a mobile phone trader and distributor in the country under the MI brand.

The ED seized Rs 5,551.27 crore from the company’s bank accounts under the provisions of the Foreign Exchange Management Act 1999.

The Central Investigation Agency had opened an investigation into the company’s “illegal remittances” in February this year.

The company started its operations in India in 2014 and began remitting money in 2015. So far, it has remitted foreign currency equivalent to Rs 5,551.27 crore to three overseas-based entities , including a Xiaomi Group entity, under cover of royalty, the polling agency said.

“Such huge sums in the name of royalties were paid on the instructions of their Chinese parent group entities,” the ED said. The amount paid to the other two unrelated US-based entities would also have been for the ultimate benefit of the Xiaomi group entities.

Xiaomi India is a mobile phone trader and distributor in India under the MI brand. It purchases the fully manufactured mobile sets and other products from the manufacturers in India. “He did not use any service from the three foreign-based entities to which these amounts were transferred,” the ED said.

Under cover of various independent documentary fronts created between group entities, the company remitted this amount as a royalty overseas, which is a violation of FEMA Section 4.

The said Civil Law Section of FEMA speaks of “holding foreign currency”. The ED also accused the company of providing “misleading information” to banks when moving money overseas.

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