ED seizes Chinese company Xiaomi India’s funds worth Rs 5,551 crore in India

Xiaomi has suffered a major setback in India. The Enforcement Directorate (ED) has attached funds worth Rs 5,551 crore of the company. The ED said that Xiaomi has violated the Indian Foreign Exchange Act. Action has been taken against Xiaomi Technology India Private Limited. In India, the company does mobile phone trading and distribution under the Mi brand name.

The agency issued a statement saying that Xiaomi India is a wholly owned subsidiary of the Xiaomi Group of China. The ED has attached an amount of Rs 5,551.27 crore in the bank accounts of the company.

The funds have been seized under relevant sections of the Foreign Exchange Management Act (FEMA). In February, the Chinese company had illegally sent some money abroad. For this the agency had started an investigation against the company. Regarding the move taken by the ED against the company, a Xiaomi spokesperson told Gadgets 360 that Xiaomi started its operations in India in 2014 and started sending money from the next year.

The ED said, “The company has sent foreign currency equivalent to Rs 5,551.27 crore under the guise of royalty to three foreign entities, including a unit of Xiaomi Group. Such a huge amount as royalty at the behest of the Chinese parent group of the company.” Rather, the money which has been sent to 2 other US based units, has also been sent to benefit Xiaomi Group in the end.

The statement further said that Xiaomi India procures completely built mobile sets and other products from manufacturers in India. Xiaomi India has not taken any such service from any of the three units to which the money has been sent. In this way documentary associations were made between the units of the group, which were not related in any way, and in the guise of these were passed on to the units in the form of royalty. This is a violation of Section 4 of FEMA.

Section 4 of FEMA talks about “holding a foreign exchange”. The ED also accused the company of giving “misleading information” to banks while remitting money abroad.

Earlier this month, the ED had also questioned the group’s global vice president Manu Kumar Jain at the agency’s regional office in Bengaluru, Karnataka.<!–