"The company started its operations in India in the year 2014 and started remitting the money from the year 2015. The company has remitted foreign currency equivalent to Rs 5,551.27 crore to three foreign-based entities which include one Xiaomi Group entity in the guise of royalty,"- according to ED.
It also states,“Xiaomi India procures completely manufactured mobile sets and other products from Indian manufacturers.” Xiaomi India has not used any of the services provided by the three foreign-based entities to which such funds have been transferred. The company remitted this amount in the guise of royalty abroad under the cover of various unrelated documentary façades created among the group entities, which constitutes a violation of Section 4 of the FEMA. In addition, while remitting money abroad, the Company provided misleading information to banks.”
The business stated in reaction to the following transaction that,“these royalty payments made by Xiaomi India were for the in-licensed technologies and IPs used in our Indian version products.” Such royalty payments are a legal commercial arrangement for Xiaomi India. We are, however, committed to working closely with government officials to clear up any misunderstandings.”
The ED had previously called Manu Kumar Jain, Xiaomi's global vice president, for interrogation in connection with an inquiry into possible violations of the foreign exchange legislation. Allegations of currency law violations at the Chinese company's Indian branch over the previous five years are being probed.
Jain, Xiaomi's former India CEO, has been requested to provide various financial records related to the firm either appearing in person or sending them through an approved agent on Wednesday.