The Enforcement Directorate (ED), which is a central probe agency in India, has confirmed that it has seized assets worth around $725 million (₹5,500 crore) from Chinese giant Xiaomi over violations of the Indian foreign exchange law.
While the agency has taken action against Xiaomi Technology India Private Limited, the company, which does business in India under the Mi brand is claiming that all its operations “are firmly compliant” with the local laws and regulations.
The Enforcement Directorate has said that it had seized the sum from the bank accounts of Xiaomi Technology India Pvt. Ltd, a wholly-owned subsidiary of Xiaomi Inc., under the Foreign Exchange Management Act (FEMA), 1999.
The agency is claiming that the subsidiary had been making remittances to three foreign entities, one of which was a Xiaomi entity, “on the instructions” of its Chinese parent. It has been probing the company since February over alleged forex violations. It had also questioned Xiaomi’s Global Vice President Manu Kumar Jain last month, who was also the Indian head of the company.
In a statement, the agency said that “Xiaomi India procures completely manufactured mobile sets and other products from the manufacturers in India. Xiaomi India has not availed any service from the three foreign-based entities to whom such amounts have been transferred. Under the cover of various unrelated documentary façades created amongst the group entities, the company remitted this amount in the guise of royalty abroad which constitutes a violation of Section 4 of the FEMA. The Company also provided misleading information to the banks while remitting the money abroad.”
Countering the claims made by the Enforcement Directorate, Xiaomi India said in a statement that “these royalty payments that Xiaomi India made were for the in-licensed technologies and IPs used in our Indian version products. It is a legitimate commercial arrangement for Xiaomi India to make such royalty payments. However, we are committed to working closely with government authorities to clarify any misunderstandings.”
Last year, the premises of Xiaomi and a few other Chinese mobile manufacturing companies were raided across the country by the Income Tax Department on the charges of tax evasion. Xiaomi continues to lead the Indian smartphone market with around 22 percent market share in Q4 2021.
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