Indian authorities have had a difficult relationship with Xiaomi. Xiaomi’s assets worth $676 million were frozen by the country’s federal financial crime agency last year, which accused it of disguising remittances to foreign entities as royalty payments. ANI reported Friday that the Chinese company has been issued a show-cause notice for a FEMA violation of 5,551 crores.
The Adjudicating Authority in India has issued a show-cause notice to Xiaomi India, its officials (CFO Sameer Rao and former MD Manu Jain), and three banks (CITI Bank, HSBC Bank, and Deutsche Bank). Enforcement Directorate (ED) filed the complaint regarding illegal remittances made by the company amounting to Rs 5551.27 crores.
As per Section 37A of the Foreign Exchange Management Act, the Competent Authority has confirmed the seizure order. It was found that the foreign exchange equivalent to Rs 5551 is rightly held by the ED when the Authority confirmed the seizure. Xiaomi India has illegally transferred Rs 27 crore out of India and the same is being held outside India on behalf of the group entity in contravention of Section 4 of the Foreign Exchange Management Act, 1999. According to the ED, the same is liable to be seized under Section 37A of the FEMA.
As the authority notes, the payment of royalty is nothing more than a means of transferring foreign exchange out of India in violation of FEMA.
