Xiaomi has had troubled relationships with Indian authorities. Last year, the country’s federal financial crime agency had frozen Xiaomi’s assets worth $676 million, accusing the company of making illegal remittances to foreign entities by disguising them as royalty payments. After a few quiet months, the Chinese company has now been issued a show-cause notice for FEMA violation of ₹5,551 crore, news agency ANI reported on Friday quoting officials.
Xiaomi India faces legal action over illegal remittances
According to reports, Xiaomi India, its officials (CFO Sameer Rao and former MD Manu Jain), and three banks (CITI Bank, HSBC Bank, and Deutsche Bank) have received a show-cause notice from the Adjudicating Authority in India under FEMA (Foreign Exchange Management Act). This notice has been sent based on a complaint filed by the Enforcement Directorate (ED) regarding illegal remittances made by the company amounting to Rs 5551.27 crores.
“The Competent Authority, appointed under Section 37A of the Foreign Exchange Management Act, has confirmed the said seizure order. The Authority while confirming the seizure held that ED is right in holding that foreign exchange equivalent to Rs 5551.27 crore has been transferred out of India by the Xiaomi India in an unauthorized manner and is held outside India on behalf of the group entity in contravention of Section 4 of the Foreign Exchange Management Act, 1999 and the same is liable to be seized in terms of provisions of Section 37A of the FEMA,” said a statement from ED.
The authority notes that the payment of royalty is nothing but a tool for transferring the foreign exchange out of India, which is a blatant violation of the provisions of FEMA.
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