FEMA confirms ED seizure order of Rs 5.5K cr against Xiaomi

Hyderabad: The Enforcement Directorate has seized the deposits worth Rs 5,551 crore belonging to the Chinese phone maker Xiaomi under the Foreign Exchange Management Act (FEMA). This is said to be the highest amount frozen till date in India, said agency sources on Friday.

The agency charged 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 Enforcement Directorate (ED) had first issued the order of seizure of these bank deposits on April 29 under the FEMA and later sent it 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 5,551.27 crore (dated 29.04.2022) passed by the Directorate of Enforcement against the Xiaomi Technology India Private Limited under the provisions of FEMA."

The agency charged that Xiaomi India did not avail any service from the three foreign-based entities to whom such amounts have been transferred. "Under the cover of various unrelated documentary facade created amongst the group entities, the company remitted this amount in guise of royalty abroad which constitute the violation of Section 4 of the FEMA." "The company also provided misleading information to the banks while remitting the money abroad," it alleged.

The agency 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.