Confirmed Latest By FEMA authority Against Xiaomi, ED’s seizure order of Rs 5,551.27 Crores

The responsible officers governing Foreign Exchange Management Act (FEMA) have signed an order to freeze deposits of Chinese mobile phone production company Xiaomi worth over Rs 5,551 crore – the highest amount froze so far in India – the ED said on Friday.

Agency complained about the popular Chinese phone manufacturer and said that the accused were involved in transferring foreign capital of around Rs 5,551.27 crore to three entities. It included two unrelated US-based entities – under the guise of royalties and one Xiaomi Group company.

The Enforcement Directorate (ED) first issued an order to seize these bank deposits on April 29 under FEMA and later sent it to the appropriate authority for approval, as required by the law.

Views Of FEMA Authorities

“The attachment order of Rs.5551.27 crore dated 29.04.2022 issued by the ED in contrast to Xiaomi under the provisions of FEMA is confirmed by the Experienced Consultant appointed of FEMA under Section 37A. There were no other seizure orders of this amount in India that the agency has confirmed to date,” the federal agency said in a statement.

FEMA confirms seizure of seizure order of Rs 5551.27 crore against Xiaomi

The agency accused Xiaomi India of not using any service from the three foreign entities to which these amounts were transferred. The agency also complained that the company had provided fake and misleading data about sending money abroad to banks. The agency said the competent authority has also observed that the payment of royalty is nothing but a tool to remit foreign exchange from India, and the same is in “blatant violation” of FEMA provisions.

The probe found that the company Xiaomi had begun its journey in India in 2014 and started disbursing money in 2015. The company paid the foreign currency equivalent of INR 5,551.27 crore to three foreign-based entities, which include one entity of the Xiaomi group, under the guise of royalty.

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About FEMA and Its Role

FEMA, i.e., The Foreign Exchange Management Act, came into existence by the Act of Parliament in 1999. FEMA was adopted on 29 December 1999. This new law is in line with the World Trade Organization (WTO) framework. It also paved the way for the Prevention of Money Laundering Act, 2002, which came into force on 1 July 2005. The main objective of FEMA was to help facilitate foreign trade and payments in India. This was to help the orderly development and maintenance of the foreign exchange market in India.

It defines the procedures, formalities, and conduct of all foreign exchange transactions in India. As per the FEMA guidelines for NRIs, proceeds from the sale of such assets are non-repatriable outside the nation without the consent of the RBI, i.e., the Reserve Bank Of India.  FEMA (Foreign Exchange Management Act) applies to the whole of India and equally to agencies and offices located outside India (owned or managed by an Indian citizen). The headquarters of FEMA is located in New Delhi and is known as the Directorate of Enforcement.

FEMA confirms seizure of seizure order of Rs 5551.27 crore against Xiaomi

FEMA is more like a piece of controlling machinery that allows the RBI to approve regulations and the Central Government to approve foreign exchange rules following India’s foreign trade policy. Violation is a violation of the provisions of the Foreign Exchange Management Act (FEMA) 1999 and the rules /regulations /notifications /orders /instructions /circulars issued there. Confession refers to the process of voluntarily admitting wrongdoing, admitting guilt, and seeking redress.

Superior goods at reasonable charges are something that everyone desires. The Company Xiaomi has a different level of following for its high-quality products built on cutting-edge technologies at practical and affordable prices. This Chinese company has its main position in electronics and mobile phones. The company has a presence in more than 100 countries and regions and was already celebrated as the world’s most awarded technology startup in 2014.

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Value Of Xiaomi and Its Conflicts 

Xiaomi is currently ranked 70th in the Top 100 Most Valuable Global Brands in 2021 by Kantar BrandZ. Xiaomi phones have gained a lot of popularity in India, which has seen only year-on-year growth. The company leads the list of successful selling phones in the nation. This mobile phone company has also made it to the ‘GUINNESS WORLD RECORDS’ by structuring the world’s largest light mosaic (logo). It was set up by placing 9,690 light bulbs, and this landmark work is located on the terrace of Xiaomi headquarters in Bengaluru.

FEMA authority approves India's highest seizure order of Rs 5,551.27 crore against Xiaomi: ED | Free Press Kashmir

“On the commands of their Chinese parent assembly units, such massive sums in the label of royals and sovereigns were forwarded. The amounts remitted to two other unrelated US-based entities were also for the ultimate benefit of the Xiaomi group entities,” it said. Xiaomi India is a marketer and distributor of mobile phones in India under the MI brand.

The competent authority under FEMA is the officer appointed by the Central Government to decide the seizure order of ED issued under the Act. The authority said that while confirming the seizure order, it found that the ED has the “right to hold” that foreign exchange equivalents of Rs 5,551.27 crore were sent out of the nation illegally by the company – Xiaomi India in an “unlawful” manner and are being seized outside India on behalf of a group entity in violation of Section 4 of FEMA.

It procures fully manufactured mobile assemblies and other products from manufacturers in India. Xiaomi India filed a plea in the Karnataka High Court against the order issued by the ED in April. It was “dismissed” by the court on July 5, according to the agency.

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Edited by Prakriti Arora

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