India's Enforcement Directorate (ED) Saturday seized over ₹ 5,500 crore from Chinese smartphone giant Xiaomi over violations of the Indian foreign exchange law. The action has been taken against Xiaomi Technology India Private Limited. The company, also called Xiaomi India, is a trader and distributor of mobile phones in the country under the brand name MI.

The ED seized ₹ 5,551.27 crore from the bank accounts of the company under the provisions of the Foreign Exchange Management Act, 199, NDTV reported. 
The central probe agency had initiated an investigation in connection with "illegal remittances" made by the company in February this year.

The company started its operations in India in 2014 and started remitting the money in 2015. It has so far remitted foreign currency equivalent to ₹ 5,551.27 crore to three foreign-based entities, which include one Xiaomi group entity, in the guise of royalty, the probe agency said.

"Such huge amounts in the name of royalties were remitted on the instructions of their Chinese parent group entities," the ED said. The amount remitted to the other two US-based unrelated entities was also reportedly for the ultimate benefit of the Xiaomi group entities.

Xiaomi India is a trader and distributor of mobile phones in India under the brand name MI. It procures the completely manufactured mobile sets and other products from the manufacturers in India. "It has not availed any service from the three foreign-based entities to whom such amounts have been transferred," the ED said.

Under the cover of various unrelated documentary facades created amongst the group entities, the company remitted this amount in the guise of royalty abroad which constitutes a violation of Section 4 of the FEMA, NDTV said. 

The ED also accused the company of providing "misleading information" to the banks while remitting the money abroad.

(SAM)