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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The post India accuses Xiaomi of forex violation; seizes assets worth $725 million appeared first on Gizmochina.

Flipkart, India’s homegrown online marketplace and the biggest competitor of Amazon in the country, could be slapped with a massive fine. The Enforcement Directorate Agency, India’s finance-crime agency, has asked Walmart-owned Flipkart and its founders to explain why it shouldn’t face a penalty of $1.35 billion.

The agency is alleging violation of foreign investment laws, claims a report from Reuters which is citing three people and an agency official as its source. The unnamed official of the agency says that the case concerns an investigation into allegations that Flipkart attracted foreign investment and a related party, WS Retail, then sold goods to consumers on its shopping website, which was prohibited under law.

The development comes at a time when Flipkart is already facing regulatory issues, tougher restrictions, and antitrust investigations in India. On top of that, complaints from smaller sellers are also growing.

The notice to the company was issued last month by the agency’s office in Chennai. Along with Flipkart, its founders Sachin Bansal and Binny Bansal as well as investor Tiger Global have received the so-called “show causes” notice. It asks to explain why they should not face a fine of ₹100 billion (approximately $1.35 billion) for the lapses. They reportedly have 90 days to respond to the notice.

Commenting on this development, A Flipkart spokesperson said to Reuters that the company “is in compliance with Indian laws and regulations,” adding that the company “will cooperate with the authorities as they look at this issue pertaining to the period 2009-2015 as per their notice.”

The Enforcement Directorate in India has been investigating e-commerce giants Flipkart and Amazon for years for allegedly bypassing foreign investment laws that strictly regulate multi-brand retail and restrict such companies to operating a marketplace for sellers.

Flipkart, founded in 2007 by Sachin Bansal and Binny Bansal, was acquired by retail giant Walmart in 2018 for $16 billion. At the time, Sachin Bansal sold his stake to Walmart while Binny Bansal retained a small stake. The company raised a $3.6 billion funding round in July, valuing the Indian e-commerce giant at $37.6 billion.

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The post Flipkart and its founders could be fined $1.35 billion for violating foreign investment laws appeared first on Gizmochina.