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Xiaomi Responds to Money Seizure; says legal commercial scheme

The Enforcement Directorate (ED) had announced on Saturday morning that it had seized funds worth over £ 5,551 from Chinese mobile phone maker Xiaomi India for violating Indian currency law.

Xiaomi has now issued a statement responding to the development. “As a brand committed to India, all of our activities are in full compliance with local laws and regulations,” Xiaomi wrote.

It added that it has studied the order from the public authorities carefully. “We believe that our royalty payments and bank statements are all legal and truthful. These royalty payments made by Xiaomi India were for the in-licensed technologies and IPs used in our Indian version products,” it noted.

The company explained that it is a legitimate commercial arrangement for Xiaomi India to make such royalty payments. Xiaomi further added that it is committed to working closely with the authorities to clear up any misunderstandings.

ED had accepted Xiaomi Technology India Private Limited. The company (also called Xiaomi India) is a retailer and distributor of mobile phones in the country under the brand name MI.

“Xiaomi India is a wholly owned subsidiary of the China-based Xiaomi Group. This amount of Rs 5,551.27, which is in the company’s bank accounts, has been seized by the Enforcement Agency,” the agency said in a statement.

The seizure of funds has taken place under relevant sections of the Foreign Exchange Management Act (FEMA), following an investigation launched by the federal agency against the company in connection with alleged “illegal money transfers” sent abroad by the Chinese company in February .

“The company has paid foreign currency equivalent to Rs 5,551.27 crore to three foreign-based entities, which include a Xiaomi group unit, in the guise of royalty,” ED said.

Such huge sums in the name of royalties were remitted following instructions from their Chinese “parent group” entities, the ED claimed.

“The amount transferred to two other US-based unrelated devices was also to the ultimate benefit of the Xiaomi Group’s devices,” ED noted.

It said that while Xiaomi India purchases fully manufactured mobile sets and other products from the manufacturers in India, it has not used any service from these three foreign based devices to which such amounts have been transferred.

“Under the guise of various unrelated documentary facades created among the group’s entities, the company has waived this amount in the guise of royalties abroad, which constitutes a violation of paragraph 4 of FEMA,” it states.

The said part of FEMA’s civil law speaks of “holding foreign currency.”

ED also accused the company of providing “misleading information” to the banks while sending the money abroad.

(With PTI inputs)

Read also: ED seizes Rs 5,551 cr of Xiaomi funds for FEMA infringement

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