The Enforcement Directorate (ED) has taken action against Xiaomi India, one of the leading smartphone manufacturers, by issuing a show-cause notice for violating the Foreign Exchange Management Act (FEMA) to the tune of ₹5,551 crore. The notice has been served to top officials of Xiaomi India, including its CFO Sameer Rao and former MD Manu Jain, as well as three banks involved in the transactions.
According to officials, the show-cause notice pertains to the illegal remittances made by Xiaomi India, amounting to ₹5,551.27 crores. The adjudicating authority under FEMA has issued notices to Xiaomi Technology India Private Limited, the two executives, as well as CITI Bank, HSBC Bank, and Deutsche Bank AG, as confirmed by the agency in a statement.
ED’s investigation revealed that Xiaomi India had made unauthorized transfers disguised as royalty payments to overseas entities, resulting in the seizure of funds belonging to Xiaomi Technology India Private Limited. The seizure amounts to ₹5,551.27 crore and has been carried out in accordance with the provisions of Section 37A of FEMA.
In response to the ED’s action, Xiaomi India and the banks involved will have to respond to the show-cause notice and settle the matter. Penalties will be imposed as per the rules and regulations outlined in FEMA. The ED’s investigation and subsequent notices aim to ensure compliance with the foreign exchange regulations and prevent any unauthorized transfers of funds outside India.
The show-cause notice serves as a legal procedure to allow the concerned parties to present their case and explain their actions. Once the investigation is complete and the matter is resolved, penalties will be levied based on the findings.
Xiaomi India, known for its popular smartphones and other electronic devices, is now required to address the allegations and cooperate with the ED during the investigation process. The company’s officials, including the CFO and former MD, will also play a crucial role in the proceedings.
The outcome of this case will not only determine the fate of Xiaomi India but also serve as a reminder to other companies to adhere to the regulations set forth by FEMA. The ED’s actions demonstrate the government’s commitment to maintaining financial transparency and preventing unauthorized transfers of funds.
As the investigation unfolds, Xiaomi India, Sameer Rao, Manu Jain, and the three banks will have to respond to the show-cause notice and work towards resolving the matter in accordance with the provisions of FEMA.
(Note: This article is based on agency inputs.)