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The Enforcement Directorate (ED) has seized funds amounting to Rs 5,551.27 crores belonging to Xiaomi Technology India Pvt. Ltd., the Indian arm of the Chinese Xiaomi Group.
This is after a fortnight of Mr. Manu Kumar Jain's( Global VP of the company) questioning. The ED is said to be investigating the company's foreign funding, its shareholding, financial statements, and all relevant activities under the allegations that the company breached the Foreign Exchange Management Act (FEMA) and made certain illegal remittances.
"ED has seized Rs.5551.27 Crore of M/s Xiaomi Technology India Private Limited lying in the bank accounts under the provisions of Foreign Exchange Management Act, 1999 in connection with the illegal outward remittances made by the company." the ED notified via a Twitter post.
The Income Tax department is also said to have initiated proceedings against the company. The IT department had conducted raids on the company in the past and said that they had seized data alleging that the company was evading taxes by inflating expenses, the figure for which could be in excess of Rs 1,400 crores.
The ED claims that the company remitted exorbitant sums of money in the guise of royalties to three different entities and provided false information to the banks regarding the transfer abroad. One of these entities was a part of the Xiaomi Group while the other two were unrelated US-based entities. The transfer to the US-based companies is said to be for the benefit of the Xiaomi Group.
Xiaomi is India's most popular and well-selling smartphone brand today owing to its cheap yet quality cellular devices. The company has maintained its innocence while claiming that all its activities have been in compliance with all relevant laws.
"We have studied the order from government authorities carefully. We believe our royalty payments and statements to the bank are all legit and truthful. These royalty payments that Xiaomi India made were for the in-licensed technologies and IPs used in our Indian version products. It is a legitimate commercial arrangement for Xiaomi India to make such royalty payments. However, we are committed to working closely with government authorities to clarify any misunderstandings," the company said in a statement.
The Indian government has banned several Chinese apps earlier, like TikTok, while citing safety concerns. Only time will tell how Xiaomi, a 22% holder of the smartphone market share in India, will fare.
Article by Aman Agarwal.
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