5.5 K crores to be seized from Chinese Xiaomi as per ED order under FEMA: Xiaomi lands in trouble

Xiaomi India faced a huge blow when the seizure order of 5,551.27 crores by the Enforcement Directorate (ED) was approved today. The order was passed against Xiaomi in April 2022. We must note that this is India’s largest seizure order to date under the Foreign Exchange Management Act (FEMA). The transaction Xiaomi had conducted earlier was conducted in an unauthorized manner and held outside India on behalf of Xiaomi. FEMA is in charge of checking foreign exchange violations and has a requirement that the appeals against such seizure orders must be heard by an authority appointed by the Centre typically.

Post the seizure order on April 29, 2022, the Chinese mobile phone brand filed a writ petition in the Karnataka High Court in order to seek a stay. The court directed Enforcement Directorate (ED) to hear the matter of the case within another 60 days’ time. However, the Karnataka high court had issued an interim order to stay the seizure. Xiaomi in the meanwhile has been able to go about its business for quite some time. Later on, within 180 days, FEMA can dispose of the petition. So they proceeded with it. However, Xiaomi and ED were allowed to present their representatives and FEMA heard their say.

This severe action was taken because Xiaomi disposed of large amounts stating them as royalty abroad. Certain amounts remitted to US foreign entities were also seen to benefit Xiaomi. As per the banks, Xiaomi, the mobile-making brand, has provided false information to the banks while remitting money abroad. These activities were hidden, illegal, and unauthorized which landed Xiaomi in trouble.