The Enforcement Directorate (ED) has seized assets worth Rs 5,551 crore from Chinese c
The Enforcement Directorate (ED) has seized assets worth Rs 5,551 crore from Chinese company Xiaomi for alleged “illegal outward remittances”.
The technology giant is being questioned by the federal agency for alleged violation under the Foreign Exchange Management Act, 1999. The action has been taken against Xiaomi Technology India Private Limited.
The company (also called Xiaomi India) is a trader and distributor of mobile phones in the country under the brand name of MI, PTI reported.
“Xiaomi India is wholly owned subsidiary of China-based Xiaomi group. This amount of Rs 5,551.27 crore lying in the bank accounts of the company has been seized by the Enforcement Directorate,” said the ED in a statement.
The seizure of funds has been done under relevant sections of the Foreign Exchange Management Act (FEMA) after a probe was launched by the federal agency against the company in connection with alleged “illegal remittances” sent abroad by the Chinese firm in February.
Xiaomi started its operations in India in 2014 and started remitting the money from the next year, it said.
“The company has 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,” the ED said.
Such huge amounts in the name of royalties were remitted on the instructions of their Chinese “parent group” entities, it alleged.
“The amount remitted to other two US-based unrelated entities were also for the ultimate benefit of the Xiaomi group entities,” the ED said.
It 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.
The said section of the civil law of FEMA talks about “holding of foreign exchange.” The ED also accused the company of providing “misleading information” to the banks while remitting the money abroad.
Earlier this month, the ED had also questioned the global vice president of the group, Manu Kumar Jain, at the agency’s regional office in Bengaluru, Karnataka.
Dear Reader,
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.
Digital Editor
www.business-standard.com