Why Xiaomi India’s assets worth Rs 5,551 crore seized?

Xiaomi is a trader and distributor of mobile phones in India under the brand name MI. The subsidiary of the Chinese company had allegedly transferred the amount to three foreign entities in February in violation of the foreign exchange law.

According to the Enforcement Directorate, Xiaomi started its operations in India in 2014 and started remitting money from the next year, the Enforcement Directorate said. The company has remitted foreign currency equivalent to Rs 5,551.27 crore to three foreign based entities,” the central agency said in its statement.

The Enforcement Directorate on Saturday seized Rs 5,551.27 crore from the bank accounts of mobile manufacturing company Xiaomi Technology India, the central agency said in a statement. Xiaomi India is wholly owned subsidiary of the China-based Xiaomi group.

Such huge amounts in the name of Royalties were remitted on the instructions of their Chinese parent group entities. The amount remitted to other two US-based unrelated entities were also for the ultimate benefit of the Xiaomi group entities," as per ED.

Earlier this month, the Enforcement Directorate had called the company's global vice president, Manu Kumar Jain, for questioning in the case. He was questioned by an investigating officer in Bengaluru.

The assets were seized under the Act after an investigation was launched against the company in connection with alleged “illegal remittances” sent abroad in February, as reported from PTI. The agency had asked Jain to send out documents related to Xiaomi's shareholding, source of funds and vendor contracts.

It also asked him to furnish the record of payments made to Indian management and remitted abroad.The company allegedly remitted funds to one Xiaomi group entity, and two others that are based out of the United States but ultimately benefit the Chinese firm.

Xiaomi India procured completely manufactured mobile sets and other products from Indian producers but transferred an amount of Rs 5,551.27 crore to these three entities despite not availing itself of any of their services, the Enforcement Directorate alleged.

Trinamool Congress MP Mahua Moitra on Saturday raised objections over the government accepting PM-CARES donations from Xiaomi, the same company whose deposits have been seized by the Enforcement Directorate on charges of violating the foreign exchange law.

The agency also accused the company of providing “misleading information” to the banks while remitting the money. The company said, "As a brand committed to India, all our operations are firmly compliant with local laws and regulations." Xiaomi further said, "We believe our royalty payments and statements to the bank are all legit and truthful."