FEMA authority slaps show-cause notices on Xiaomi, 3 foreign banks
The move follows the authority confirming a seizure order of Rs 5,551.27 crore, passed by the Enforcement Directorate (ED) against the Chinese phone maker in April last year under FEMA provisions, alleging that the company had been remitting money illegally to foreign entities under the guise of royalties.
Those who have been served show-cause notices include the company, its Director and Chief Financial Officer Sameer B Rao, and former managing director Manu Kumar Jain.
The banks got show-cause notices following directions by the Reserve Bank of India for supposedly allowing remittances without conducting due diligence or obtaining any underlying technical collaboration agreement from the company, the federal agency said.
The authority held the ED was right in holding that foreign exchange equivalent to Rs 5,551.27 crore had been moved out of India by Xiaomi India in contravention of Section 4 of FEMA and the amount was liable to be seized.
This was done under cover of an unrelated documentary façade created among group entities, the ED stated.
Xiaomi India, the wholly owned subsidiary of the China-based Xiaomi group, disputed the ED’s order before the Karnataka High Court but its writ petition was dismissed. The court directed the Chinese mobile phone major to approach the competent authority regarding its dispute with the ED.
About The Author
