The Company is a retailer and distributor of mobile phones in the country under the MI brand name
The Company is a retailer and distributor of mobile phones in the country under the MI brand name
“More than £5,551 million in funds held by Chinese handset maker Xiaomi India have been ‘seized’ for violating India’s foreign exchange law,” the Enforcement Directorate said on April 30.
The lawsuit was brought against Xiaomi Technology India Private Limited. The company (also called Xiaomi India) is a retailer and distributor of mobile phones in the country under the MI brand name.
“Xiaomi India is a wholly owned subsidiary of the China-based Xiaomi Group. This £5,551.27 billion in the company’s bank accounts has been seized by enforcement,” the agency said in a statement.
The seizure of funds came under relevant sections of the Foreign Exchange Management Act (FEMA) after federal agencies launched an investigation into the company in connection with alleged “illegal remittances” the Chinese firm sent overseas in February.
“Xiaomi started its operations in India in 2014 and started transferring the money from the next year,” it said. “The company has transferred the equivalent of £5,551.27 million in foreign currency to three overseas-based companies, including a Xiaomi group company, under the guise of a royalty,” the ED said.
“Such huge amounts in the name of royalties were transferred on the instructions of their Chinese ‘parent companies’,” it said. “The amount transferred to two other US-based unaffiliated companies also ultimately benefited Xiaomi group companies,” the ED said.
It said that while Xiaomi India procures fully manufactured mobile phones and other products from the manufacturers in India, it has not used any services from these three overseas-based companies to which such funds have been remitted. “Under the guise of various unrelated documentary fronts created among the affiliated companies, the company transferred this amount overseas under the guise of royalties in violation of Section 4 of FEMA,” it said.
The said division of civil law of FEMA speaks of “holding foreign exchange”. The ED also accused the company of giving banks “misleading information” while sending the money abroad.
Earlier this month, the ED had also interviewed the group’s global vice president, Manu Kumar Jain, at the agency’s regional office in Bengaluru, Karnataka.
