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Seizure of Rs 5,551 crore from Xiaomi, India’s largest, approved by Forex authority

Seizure of Rs 5,551 crore from Xiaomi, India's largest, approved by Forex authority

The ED said that Xiaomi India sent funds abroad “disguised as royalty”, which violated FEMA

New Delhi:

India’s foreign exchange authority has confirmed the seizure of Rs 5,551 crore from Chinese phone maker Xiaomi for allegedly sending money abroad, the country’s top anti-money laundering body said in a statement today.

The Enforcement Directorate, or ED, seized Rs 5,551 crore from Xiaomi Technology India Pvt Ltd in April, the largest seizure of funds in the country to date.

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Now, the authority under the Foreign Exchange Management Act, or FEMA, has confirmed that ED was correct in seizing Xiaomi funds, which the Chinese company allegedly illegally transferred out of India, the investigative agency said in a statement today.

FEMA is India’s rule book that guides all foreign exchange transactions.

The ED said the exchange authority agreed that the way Xiaomi India withheld the funds out of the country on behalf of the group entity violated FEMA, and this led to the funds being seized.

In April, the ED said that Xiaomi India sent the funds abroad “disguised as royalty”, which was a violation of FEMA.

“The competent authority also noted that royalty payment is nothing more than a tool to transfer foreign currency out of India and the same constitutes a flagrant violation of FEMA provisions,” the ED said in today’s statement.

Xiaomi India is a wholly owned arm of China-based Xiaomi group. It started operations in India in 2014 and started sending money abroad a year later.

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“Such huge amounts in the name of royalties were remitted on the instructions of the Chinese parent group entities. The amount remitted to two other US-based unrelated entities was also for the ultimate benefit of the Xiaomi group entities.” , the ED said in the statement. This day.

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Xiaomi India has not used any services of the three foreign entities to which the funds have been sent, the ED said, adding that the phone maker also provided misleading information to banks while sending money abroad.

Xiaomi India had filed a petition with the Karnataka High Court for the seizure of funds. The court dismissed the petition in July.

In May, Chinese state media reported that India should stop “regulatory attack” on Chinese companies after Xiaomi Corp alleged threats of “physical violence”. Xiaomi had told the Karnataka High Court that its top executives faced threats and coercion during interrogation by the Enforcement Directorate in the illegal remittances case. The Execution Directorate described the accusations as “false and unfounded.”

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