Tag: fema

Xiaomi India Officials, 3 Banks Served ED Notice for FEMA Violation

Xiaomi India CFO Sameer Rao, former MD Manu Jain and three banks are said to have received show-cause notice from the Enforcement Directorate (ED). According to an official, the ED has served show-cause notice for FEMA violation of over Rs. 5,551 crore. 

The Enforcement Directorate (ED) on Friday confirmed in a tweet that it has issued show-cause notices to Chinese mobile manufacturer Xiaomi, its chief financial officer and director Sameer Rao, former MD Manu Jain and three foreign banks for alleged foreign exchange violation of more than Rs. 5,551 crore.

 

The adjudicating authority under the Foreign Exchange Management Act has issued show-cause notices to Xiaomi Technology India Private Limited, the two executives, CITI Bank, HSBC Bank and Deutsche Bank AG, the agency said in a statement.

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

“The competent authority, appointed under Section 37A of the FEMA, has confirmed the said seizure order.

“The authority while confirming the seizure held that ED is right in holding that foreign exchange equivalent to Rs. 5,551.27 crore has been transferred out of India by Xiaomi India in an unauthorised manner and is held outside India on behalf of the group entity in contravention of section 4 of FEMA, 1999 and the same is liable to be seized in terms of provisions of Section 37A of the FEMA,” it said.

Under the FEMA, a show-cause notice is issued after the completion of the ED investigation and once it is settled, an accused is required to pay penalty.

Xiaomi launched its camera focussed flagship Xiaomi 13 Ultra smartphone, while Apple opened it’s first stores in India this week. We discuss these developments, as well as other reports on smartphone-related rumours and more on Orbital, the Gadgets 360 podcast. Orbital is available on Spotify, Gaana, JioSaavn, Google Podcasts, Apple Podcasts, Amazon Music and wherever you get your podcasts.
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Xiaomi India Dismisses Speculation on India Operations Being Moved to Pakistan as ‘False and Baseless’

Xiaomi on Friday dismissed speculation that the company might move its operations from India to Pakistan. The company responded to a tweet from a portal on Twitter that claimed the Chinese smartphone manufacturer might shift operations after its funds were frozed by authorities in India over alleged violation of the Foreign Exchange Management Act (FEMA) rules. Earlier this week, the Karnataka High Court had denied Xiaomi’s appeal for relief after nearly Rs. 5,500 crore worth of the company’s assets were frozen by the Enforcement Directorate in April. 

A tweet by South Asia Index on Thursday claimed that the Chinese smartphone maker might move its operations from India to Pakistan after the government of India froze the firm’s assets worth $676 million (roughly Rs. 5,500 crore). Xiaomi responded to the tweet on Friday, stating that it was “complete false and baseless”.

The company went on to state that it joined the government’s Make in India initiative after it entered the Indian market in 2014. It also added that 99 percent of the company’s smartphones and all its TV models were assembled in India. 

Xiaomi’s clarification on Twitter came a day after the company’s appeal to the Karnataka High Court to lift the freeze on $676 million (nearly Rs. 5,500 crore) worth of assets was denied by the court. The company is being probed by the ED for allegedly made illegal remittances to foreign entities by passing them off as royalty payments. 

The freezing of Xiaomi’s assets was confirmed by the competent authority under FEMA on September 30. The seizure is the highest amount in India to be confirmed by the authority till date, according to the ED.

The company had argued that the freezing of the assets was “severely disproportionate and has effectively halted the operations” of the company, according to a report by Reuters. The company previously claimed that its royalty payments were legitimate and truthful, and that it would “continue to use all means to protect the reputation and interests.”

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ED Seizes Rs. 5,551 Crore Worth of Deposits of Xiaomi India Under FEMA

The competent authority under the Foreign Exchange Management Act (FEMA) has approved an order of seizure of over Rs. 5,551 crore worth of deposits of Chinese mobile phone manufacturer Xiaomi, the highest amount frozen till date in India, the ED said on Friday.

The Enforcement Directorate (ED) had issued the order of seizure on April 29 under the FEMA and later sent it for approval of the competent authority, as required under the law that regulates foreign exchange violations in the country.

The order has been issued under section 37A of the FEMA against Xiaomi Technology India Private, the federal agency said in a statement.

“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 of Rs. 5,551.27 crore, held that ED is right in holding that foreign exchange equivalent to Rs. 5,551.27 crore has been transferred out of India by Xiaomi India in an unauthorised manner and is held outside India on behalf of the group entity in contravention of Section 4 of the FEMA,” the agency said.

The competent authority also observed that the payment of royalty is nothing but a tool to transfer the foreign exchange out of India and the same is in “blatant violation” of the provisions of FEMA, it said.

Xiaomi is a trader and distributor of mobile phones in the country under the brand name of MI and Xiaomi India is a wholly-owned subsidiary of China-based Xiaomi Group.

Earlier in August, it was reported that Xiaomi has been issued three showcase notices, with an approximate duty liability of about Rs. 653 crore, of which it had deposited only Rs. 46 lakh, as informed by Finance Minister Nirmala Sitharaman to the parliament.

ED in late April seized Rs. 5,551.27 crore of Xiaomi Technology India — a wholly-owned subsidiary of the China-based Xiaomi group — under the Foreign Exchange Management Act (FEMA) in connection with illegal remittances made by the firm in February this year.

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ED Probing WazirX in 2 Cases, Transactions With Binance ‘Cloaked in Mystery’, Says MoS Finance

Minister of State for Finance Pankaj Chaudhary on Tuesday said the Enforcement Directorate is probing alleged money laundering of Rs 2,790 crore through crypto exchange WazirX. The ED is investigating two cases related to cryptocurrency against WazirX under the provisions of Foreign Exchange Management Act, 1999 (FEMA), he said in a written reply to the Rajya Sabha.

“In one of the cases, investigation done so far has revealed that one Indian Crypto-exchange platform, WazirX, operated by Zanmai Labs Private Limited in India was using the walled infrastructure of Cayman Island based exchange Binance. Further it has been found that all crypto transactions between these two exchanges were not even being recorded on the blockchains and were thus cloaked in mystery,” he said.

Accordingly, he said, a show cause notice (SCN) has been issued under the provisions of FEMA against WazirX for allowing outward remittance of crypto assets worth Rs 2,790 crore to unknown wallets.

Further, in another case, it is noticed that Indian Exchanges namely WazirX has allowed the foreign users’ request to convert one crypto into another on its own platform as well as by using transfer from third-party exchanges namely FTX, Binance, etc, he said.

In reply to another question, Chaudhary said cryptocurrencies and non-fungible tokens (NFTs) are by definition borderless and require international collaboration to prevent regulatory arbitrage.

Therefore, any legislation for regulation or for banning possession of and trade in such a borderless sector can be effective only after significant international collaboration on evaluation of the risks and benefits and evolution of common taxonomy and standards, he said.

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