ED issues showcause notice Xiaomi India for Rs 5,551 crore FEMA Violation
The Enforcement Directorate (ED) has recently issued show-cause notices to Xiaomi Technology India Pvt Ltd, as well as its officials and three banks, under the Foreign Exchange Management Act (FEMA). The alleged violation involves foreign exchange transactions exceeding Rs. 5,551.27 crore.
Manu Kumar Jain, who used to be the MD of Xiaomi India, and Sameer B Rao, the director and CFO, have received show-cause notices. Additionally, Citi bank, HSBC Bank, and Deutsche Bank AG have also received notices for their role in the violation.
The Adjudicating Authority has issued SCN to Xiaomi Technology India Private Limited, its officials and 3 banks under FEMA on the basis of complaint filed by the ED with respect to illegal remittances made by the company to the tune of Rs.5551.27 Crore.
— ED (@dir_ed) June 9, 2023
The ED claims that these banks allowed foreign remittances under the guise of royalty payments without conducting proper due diligence or obtaining any underlying Technical Collaboration Agreement.
Last year, the federal probe agency had seized Rs. 5,551.27 crore from bank accounts belonging to Xiaomi India, a wholly-owned subsidiary of the China-based Xiaomi group. This action was taken in connection with alleged illegal outward remittances made by the company, which violated the provisions of FEMA.
The issuance of show-cause notices is a standard procedure following the completion of an ED investigation. Once the matter is settled, penalties may be imposed on the accused as per FEMA regulations.
ED on the development, said:
An investigation confirmed that Xiaomi India transferred foreign exchange amounting to Rs. 5,551.27 crore out of India in an unauthorized manner, holding it outside the country on behalf of the group entity. This action is considered a violation of section 4 of FEMA, 1999, and the ED has the authority to seize the funds under Section 37A of FEMA.