New Delhi, September 30
The Enforcement Directorate (ED) on Friday said that the competent authority under the Foreign Exchange Management Act (FEMA) has confirmed an order of seizure of over Rs 5,551 crore worth of deposits of Chinese mobile phone manufacturer Xiaomi.
The agency in an official statement said, “This is the highest amount of seizure order in India which has been confirmed by the authority till date.”
The agency has accused the popular Chinese phone maker with remitting foreign currency equivalent to Rs 5,551.27 crore to three entities — one Xiaomi Group company and two US-based unrelated entities — in the guise of royalty.
The ED had had first issued the seizure order of these bank deposits on April 29, 2022, under the FEMA and later sent the same for approval of the competent authority, as required under the law that regulates foreign exchange violations in the country.
“The competent authority appointed under section 37A of the FEMA has confirmed the seizure order of Rs 5551.27 crore (dated 29.04.2022) passed by the Directorate of Enforcement against Xiaomi Technology India Private Limited under the provisions of FEMA,” the statement ead.
A competent authority under the FEMA is an officer appointed by the Central Government to adjudicate an ED seizure order issued under the law. Such an officer should not be below the rank of a joint secretary.
The authority, the ED said, while confirming the seizure order held that the agency is “right in holding” that foreign exchange equivalent to Rs 5,551.27 crore has been transferred out of India by Xiaomi India in an “unauthorized” manner and is held outside India on behalf of the group entity in contravention of Section 4 of the FEMA.
The ED said the competent authority also observed that the payment of royalty is nothing but a tool to transfer the foreign exchange out of India and the same is in “blatant violation” of the provisions of FEMA.
The agency had earlier charged that Xiaomi India did not avail any service from the three foreign based entities, to whom it had transferred such amounts.
“Under the cover of various unrelated documentary faccedil;ades created amongst the group entities, the company remitted this amount in guise of royalty abroad which constitute violation of Section 4 of the FEMA. The company also provided misleading information to the banks while remitting the money abroad,” it had alleged.
Xiaomi started its operations in India in the year 2014 and started remitting the money from the year 2015, the ED’s probe has found.