The Enforcement Directorate has seized Rs 5,551.27 crore of the Bengaluru-based Chinese telecom firm Xiaomi Technology India, under the provisions of Foreign Exchange Management Act (FEMA). The amount was seized from four bank accounts of Xiaomi with HSBC, Citibank, IDBI and Deutsche Bank.
The ED had initiated an investigation in connection with the illegal remittances made by the company in February 2022 to companies based abroad, in the guise of royalties. Xiaomi started its operations in India in 2014 and started remitting the money from 2015. Remittances made to other two US-based, unrelated entities were also for the ultimate benefit of entities of the China-based Xiaomi Group.
“The company 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. Such huge amounts in the name of royalties were remitted on the instructions of their Chinese parent group entities,” said ED in a statement.
Xiaomi India is a trader and distributor of mobile phones, with an annual turnover of Rs 34,000 crore in India, under the brand name of MI. Xiaomi India procures completely manufactured mobile sets and other products from manufacturers in China. It has not availed any service from the three foreign-based entities to whom huge amounts of remittance were transferred.
“Xiaomi India has not provided any technological input or software-related assistance to these contract manufacturers. Interestingly, Xiaomi India has transferred money to the three foreign-based entities from which they have not availed any kind of service. The company remitted this amount in guise of royalty abroad which constitutes violation of the FEMA. The company also provided misleading information to the banks while remitting the money abroad,” ED statement added.
The Confederation of All India Traders Association (CAIT) welcomed the ED action on the China-based Xiaomi Group and demanded further audit of all foreign-funded companies siphoning money out of India as royalty.
“We have been repeatedly raising concerns over the funding and financial management of Chinese mobile companies. These foreign-funded companies have destroyed the domestic trade of Indian businesses, with their monopolistic business malpractices,” alleged CAIT Secretary General Praveen Khandelwal.
