ED Investigates Xiaomi India Execs And Banks For Alleged Rs 5,551 Crore FEMA Violations

On Friday, the Enforcement Directorate (ED) announced that it has sent show-cause notices to Xiaomi’s Indian division, as well as its CFO and director Sameer B Rao, former MD Manu Kumar Jain, and three foreign banks. The notices are related to alleged violations of foreign exchange laws amounting to over Rs 5,551 crore.

The Adjudicating Authority (Foreign Exchange Management Act) has issued notices to Xiaomi Technology India Private Limited, two directors, CITIbank, HSBC Bank and Deutsche Bank AG under Section 16 of FEMA, the federal agency said. opinion.

Introduction A notice is issued after a FEMA preliminary investigation is completed, and once settled, the accused may be required to pay a fine that may be three times the amount of the violation.

Notices have been issued to the company and to Jain and Rao, the ED said.

The adjudicating authority has also issued show cause notices to three banks – Citibank, HSBC Bank and Deutsche Bank AG – for violating Sections 10(4) and 10(5) of the FEMA Act and guidelines issued by the Reserve Bank of India (RBI). ), as they allow foreign remittances in the name of royalties through banks, “without” due diligence and “without” obtaining any underlying technical cooperation agreement from the company, it said.

The ED had earlier seized funds worth Rs 5,551.27 crore in FEMA bank accounts of Xiaomi Technology India Private Limited for “unauthorised” remittance of this amount abroad under the guise of royalty payment.

“The said confiscation order has been confirmed by the Competent Authority designated under Section 37A of FEMA. The authority upheld the seizure, finding that the ED is correct in holding that Xiaomi India had transferred currency equivalent to Rs 5,551.27 crore from India without permission and that it is being held outside India on behalf of the group entity against it. of Section 4 of FEMA, 1999 and can be seized under the provisions of Section 37A of FEMA,” it said.

According to the agency, the competent authority also found that the payment of royalties was only a vehicle to move currency out of India and was in “flagrant” violation of FEMA regulations.

The ED said its investigation launched last year has found that the company had remitted foreign currency equivalent to Rs 5,551.27 crore to three offshore entities, including a unit of the Xiaomi group, under the guise of royalty payments.

“The company paid this amount abroad under the guise of royalty payment under the guise of documentary facades created between various corporate entities, in violation of Section 4 of FEMA,” the statement said. PTI NES RC