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Current Affairs

ED case against Xiaomi

Date: 05 May 2022 Tags: Miscellaneous

Issue

Assets belonging to Chinese mobile phone manufacturer Xiaomi Technology India Private Limited were seized by the Enforcement Directorate (ED).

 

Background

Xiaomi is the largest seller of mobile phones in India and manufactures the popular mobile phone brand Mi.

 

Details

  • The alleged violation of the Foreign Exchange Management Act (FEMA) is the reason for the case investigated by ED.

  • The company is accused of sending large amounts of money abroad to related entities in the name of royalties from the past seven years.

  • Money is being sent to abroad entities without utilizing any services from them. This is seen as a violation of Section 4 of FEMA.

 

Investigations

  • Foreign currency equivalent to Rs 5551.27 crore has been remitted to three foreign based entities.

  • Money in the name of royalties was remitted on the instructions of their Chinese parent group entities.

  • The company completely procures product from Indian manufacturers. The company has not availed any service from the three foreign based entities getting paid.

  • The company also gave misleading information to Indian banks while remitting such high amount of funds.

 

ED’s action

After conducting full-fledges investigation, the agency issued orders to seize Rs 5,551.27 crore belonging to Xiaomi Technology India Private Limited lying in banks.

 

Response

Xiaomi has said that it is studying the order of the agency. The royalty payments that Xiaomi India made were for the in-licensed technologies and IPs used in Indian version products.