ED seizes Rs 5,500 crore from Chinese smartphone giant Xiaomi over fake royalty payments

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The Enforcement Directorate (ED) today seized over Rs 5,500 crore from the bank accounts of Chinese smartphone giant Xiaomi as the company has violated India’s foreign exchange law.</p>
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The seizure has been made following an investigation carried out into "illegal remittances" under the guise of royalty made by the company in February this year, according to an ED statement.</p>
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The company began its operations in India in 2014 and started remitting the money in 2015. It has so far illegally remitted foreign currency equivalent to Rs 5,551.27 crore to three foreign-based entities, which include one Xiaomi group entity,  the Central investigative agency said.</p>
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"Such huge amounts in the name of royalties were remitted on the instructions of their Chinese parent group entities," the ED said. The amount remitted to the other two US-based unrelated entities was also reportedly for the ultimate benefit of the Xiaomi group entities.</p>
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Xiaomi India is a trader and distributor of mobile phones in India under the brand name MI. It procures completely manufactured mobile sets and other products from the manufacturers in India.</p>
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"It has not availed any service from the three foreign-based entities to whom such amounts have been transferred in the guise of royalty," the ED said.</p>
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The company has been found in breach of the foreign exchange management act (FEMA) which deals with the "holding of foreign exchange."</p>
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The ED also accused the company of providing "misleading information" to the banks while remitting the money abroad.</p>