FEMA authority confirms India's highest seizure order of Rs 5551.27 crore against Xiaomi

In a major setback for Xiaomi India, the Competent Authority, appointed under Section 37A of the Foreign Exchange Management Act, on Friday confirmed seizure order of Rs 5551.27 crore passed by the Enforcement Directorate(ED) against the Chinese phone maker in April this year.

This is the highest amount of seizure order in India which has been confirmed by the Authority till date.

The Authority, while confirming the seizure, held that the probe agency was right in holding the foreign exchange equivalent to Rs 5551.27 crore as Xiaomi India had transferred the same amount out of India in an unauthorised manner.


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.

Earlier this year, ED seized Rs 5551.27 crore of Xiaomi Technology India Private Limited under the provisions of Foreign Exchange Management Act,1999. According to the ED, the company started its local operations in 2014 and began remitting money in 2015. The company has remitted this amount to three foreign-based entities that include one Xiaomi Group unit as royalty payments.

Such huge amounts in the name of royalties were remitted on the instructions of their Chinese parent group entities. The amount remitted to other two US based unrelated entities were also for the ultimate benefit of the Xiaomi group entities, as per the ED.

Xiaomi India, the wholly-owned subsidiary of China-based Xiaomi group, disputed the ED's order before the Karnataka High Court but its writ petition was dismissed by the court. The court, however, directed the Chinese mobile phone major to approach the competent authority regarding its dispute with the ED.

Other than the ED and MCA, the income tax department has also taken action against Chinese-owned smartphone companies.