Xiaomi says it is disappointed after ₹5,551.27 crore seizure order is upheld, claims the remittances are legitimate

• Xiaomi has said that it is disappointed after an appellate authority upheld the ₹5,551.27 crore seizure order.
• The Enforcement Directorate (ED) in April passed an order to seize ₹5,551.27 crore from the company’s bank accounts.
• ED had claimed that Xiaomi India had violated the provisions of the Foreign Exchange Management Act.

In a major setback to Chinese smartphone maker Xiaomi, an appellate authority upheld the Enforcement Directorate’s order to seize ₹5,551.27 crore from the company for violations of the Foreign Exchange Management Act (FEMA).

The ED, in a press release, said, “The Competent Authority appointed under Section 37A of the Foreign Exchange Management Act has confirmed the seizure order of Rs. 5551.27 Crore dated 29.04.2022 passed by the Directorate of Enforcement (ED) against Xiaomi Technology India Private Limited under the provisions of FEMA.”

The ED in April 2022 had ordered a seizure of ₹5,551.27 crore from the company’s bank accounts. The financial watchdog had claimed that Xiaomi had illegally remitted foreign currency equivalent to ₹5,551.27 crore to three foreign-based entities on the instructions of its parent company in China.

In May, a Business Insider India report revealed that 84% of the above amount was remitted to the Qualcomm Group as part of royalty payments for the chipsets used by the company.

The smartphone maker had claimed that Xiaomi India had agreed with Qualcomm to license IP for manufacturing smartphones.

However, the competent authority was not satisfied with this.

“The Competent Authority also observed that payment of royalty is nothing but a tool to transferring the foreign exchange out of India, and the same is in blatant violation of provisions of FEMA,” the ED added in its release.

Xiaomi says it is disappointed

Xiaomi, in its statement said it was “disappointed” with the decision and will continue to protect its interests.

“All royalty payments made by Xiaomi India were only related to sales done by Xiaomi India, not for any other countries or regions. The Qualcomm Group has also confirmed this. These royalty payments were made via RBI approved and mandated banking channels and are legitimate commercial arrangements,” Xiaomi India said in a statement.

“We will continue to use all means to protect the reputation and interests of the Company and our stakeholders. We remain committed to working with various authorities to resolve the issue,” the company added.

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