Tech News Summary:
- The Enforcement Directorate in India has issued notices of justification to Xiaomi Technology India Private Limited, its officers, and three banks under FEMA for illegal remittances worth Rs 5,551.27 crore.
- The three banks – CITI Bank, HSBC Bank, and Deutsche Bank AG – allowed foreign remittances abroad in the name of royalties through banks without carrying out due diligence or obtaining any technical collaboration agreement from the company and have contravened Section 10(4) and 10(5) of FEMA.
- The investigation found that the company remitted foreign currency equivalent to Rs 5,551.27 crore to three foreign-based entities under the guise of royalties, violating Section 4 of FEMA.
Mumbai, India – The Enforcement Directorate (ED) has reportedly issued a showcause notice to Xiaomi, a leading maker of smartphones and other devices, for allegedly violating Foreign Exchange Management Act (FEMA) regulations.
According to sources, the ED has accused Xiaomi of non-compliance with FEMA rules in connection with its aggregate foreign investment. The agency claimed that the Chinese tech firm had received investments from foreign entities that exceeded the permissible limit of 74%.
The ED further alleged that Xiaomi had also violated RBI guidelines by not seeking necessary approvals for undertaking activities in India that require prior permission.
The ED’s move comes after the Reserve Bank of India (RBI) raised concerns over Xiaomi’s shareholding pattern in the country. Last year, the central bank had directed the company to ensure compliance with FEMA rules or face penalties.
In response to the ED’s notice, Xiaomi has reportedly said that it has always complied with Indian laws and will provide necessary information to the authorities in this regard.
The company has been given 30 days to respond to the showcause notice. Failure to comply could result in severe penalties, including fines and even cancellation of licenses.
This is not the first time that Xiaomi has faced regulatory issues in India. In the past, the company has been accused of violating data privacy laws and misrepresenting products. However, Xiaomi has always maintained that it operates within the legal framework of the country and is committed to complying with all regulations.