ED seizes Xiaomi's assets worth Rs 5,551 cr over 'illegal outward remittances'

The whopping amount lying in the bank accounts under the provisions of the Foreign Exchange Management Act, 1999 is in connection with the illegal outward remittances made by the company, the central agency said in a statement on Saturday.

New Delhi:The Enforcement Directorate (ED) has seized assets worth Rs 5,551 crore from Chinese company Xiaomi for alleged "illegal outward remittances". The whopping amount lying in the bank accounts under the provisions of the Foreign Exchange Management Act, 1999 is in connection with the illegal outward remittances made by the company, the central agency said in a statement on Saturday.

The seizure of funds has been done under relevant sections of the Foreign Exchange Management Act (FEMA) after a probe was launched by the federal agency against the company in connection with alleged "illegal remittances" sent abroad by the Chinese firm in February. Xiaomi started its operations in India in 2014 and started remitting the money from the next year, it said.

"The company has remitted foreign currency equivalent to Rs 5,551.27 crore to three foreign based entities which include one Xiaomi group entity, in the guise of royalty," the ED said. Such huge amounts in the name of royalties were remitted on the instructions of their Chinese "parent group" entities, it alleged. "The amount remitted to other two US-based unrelated entities were also for the ultimate benefit of the Xiaomi group entities," the ED said.

It said while Xiaomi India procures completely manufactured mobile sets and other products from the manufacturers in India it has not availed any service from these 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 violation of section 4 of the FEMA," it said.

The said section of the civil law of FEMA talks about "holding of foreign exchange." The ED also accused the company of providing "misleading information" to the banks while remitting the money abroad. Earlier this month, the ED had also questioned the global vice president of the group, Manu Kumar Jain, at the agency's regional office in Bengaluru, Karnataka.

Also:ED summons Xiaomi's former India managing director Manu Kumar Jain