Xiaomi issued a statement on Saturday after the enforcement directorate seized R5551.27 crore from Xiaomi Technology India Pvt Ltd accused of violating the Foreign Exchange Administration Act. As a brand committed to India, the company said all of its operations are “fully compliant with local laws and regulations.”
We have carefully studied the order issued by the government authorities. We believe the royalty payments and bank statements are all legitimate and honest. The royalty payments made by Xiaomi India were related to unlicensed technologies and IP addresses used in our Indian Edition products. It is a legitimate commercial arrangement for Xiaomi India to make these royalty payments. However, we are committed to working closely with government authorities to clear up any misunderstandings.
The agency accused the company of providing “misleading information” to banks while transferring funds abroad, a transaction that the agency claimed was illegal.
“Xiaomi India is a wholly owned subsidiary of the China-based Xiaomi Group. This amount of RRs 5,551.27 crore has been seized in the company’s bank accounts by the Enforcement Directorate.”, was questioned by the agency early this month.
Xiaomi began operations in India in 2014 and began transferring funds from the following year, the ED said. “The company has converted the equivalent of foreign currency RThe ED said Rs 5,551.27 crore to three foreign entities comprising one Xiaomi Group entity, under the guise of equity”, claiming that such huge sums in the name of royalties were transferred on the instructions of Chinese ‘parent group’ entities.
“The amount transferred to two other unrelated entities in the United States was also for the benefit of the Xiaomi group entities,” the CEO said.
The agency said that while Xiaomi India buys fully manufactured mobile devices and other products from manufacturers in India, it has not benefited from any service from these three foreign entities to which these sums have been transferred. “Under the guise of various unrelated documentary interfaces created between group entities, the Company transferred this amount into offshore ownership in violation of Section 4 of the Federal Emergency Management Act (FEMA),” the company said.