Indian FEMA Authorities confirms Enforcement Directorate's seizure order for Rs.5551.27 crores passed against Xiaomi Technology India Pvt limited
Xiaomi India which is 100% Subsidiary of China based Xiaomi group, is trader and distributor of mobile phones in India, since 2014, under the brand name of MI. Xiaomi India, procures completely manufactured mobile sets and other products, from the manufacturers in India.
Seizure details:
ED has seized Rs.5551.27 Crores lying the bank accounts,that has been transferred out of India, by Xiaomi India in an unauthorised manner and is held outside India on behalf of the group entity in contravention of Section 4 of the Foreign Exchange Management Act, 1999.
ED has initiated probe in the month of February 2022, in connection with illegal remittances made by the company. ED had issued the order of seizure on 29th April'22 and subsequently had sent it for approval to FEMA's competent authority, as required under FOREX regulations in India.
Modus Operandi of Money Laundering:
Xiaomi Technology India Pvt limited, is said to have remitted about $725 million, Indian equivalent : ₹5551 Cr over the years since year 2015, to three Entities, one being Xiaomi Group entity and two others being US based entities, in the guise of Royalty payment & under cover of various unrelated documentary facade based on instructions of Chinese parent group entity. The amount remitted to US based entities were also towards the ultimate benefit of Xiaomi group entities. The Company has also provided misleading information to the banks while remitting the money abroad.
ED had claimed in its appeal to authorities that the company procures mobile phones as fully manufactured sets from manufacturers in India and has not availed any service from three foreign based entities to whom the amount is transferred and hence constitutes to be violation of FEMA provisions.
ED mentioned that Competent Authority had also made an observation that payment of royalty is nothing but a tool to transfer foreign exchange out of India, which is blatant violations of provisions of FEMA.
It also stated this is the highest amount of seizure order, that has been confirmed by the competent authority, till date.