Considering all that is going on between Xiaomi and the government of India, it seems like the troubles of the brand are not going to end anytime soon. Recently, the Competent Authority appointed under Section 37A of the Foreign Exchange Management Act has put a stamp on a seizure of Rs 5551.27 crore forwarded by the Directorate Enforcement (ED) against Xiaomi Technology India Private Limited. As per the record, this is the highest amount of seizure orders in India, and the Authority has also confirmed the same.
In a statement released by the Competent Authority, it has been mentioned that ED has done the right thing by holding foreign exchange equal to the amount of Rs 5551.27 crore. The amount has been tranferred from India by Xiaomi India in an unauthorized manner, and it is kept outside the country on behalf of the group entity. The same amount is in contravention of Section 4 of the Foreign Exchange Management Act, 1999, and the same is supposed to be seized in terms of provisions of Section 37A of the FEMA.
Another major highlight of the whole scenario is that the payment of royalty is being used as a tool to transfer the foreign exchange out of India, and it is a clear violation of provisions set by FEMA. Not only this, but Xiaomi also provided misleading information to the banks at the time of remitting the money.
Previously, ED seized a total amount of Rs 5551.27 crore of M/s Xiaomi Technology India Private Limited under the provisions of the Foreign Exchange Management Act, 1999. Xiaomi, without any authorization, remitted this amount in the name of royalty abroad, which violates Section 4 mentioned in FEMA.
In response to the scenario, Xiaomi India has filed a writ petition before the High Court of Karnataka against the orders. The petition was dismissed by the Honorable High Court. Xiaomi India is completely owned by the Xiaomi group based out in China. The amount of Rs 5551.27 crore has been remitted to three foreign entities by the Xiaomi Group. Until now, Xiaomi has not used any service from foreign entities in exchange for the amounts transferred.