May 19, 2022

Vanthuluutru

Fine Art Of Business

Enforcement Directorate denies Xiaomi’s charges of coercion during forex probe

2 min read

The Enforcement Directorate has denied allegations that Xiaomi executives were coerced into giving statements implicating the Chinese smartphone manufacturer during its forex violations probe against the company.

“The ED denies allegations made by Xiaomi India that statements of its officials were taken under coercion as untrue and baseless,”a statement by the central agency said on Monday.

The statement came in response to a Reuters news report that quoted the Chinese newspaper Global Times as criticising the ED’s actions. “India should stop its ‘regulatory assault’ on Chinese companies,” the news agency quoted the Global Times as having written.

Reuters reported on Saturday that Xiaomi told an Indian court that its top executives had faced threats and coercion during questioning by the Enforcement Directorate.

According to Reuters, the Global Times said in an opinion piece that the uncertainty surrounding Xiaomi’s “regulatory predicament should raise a red flag for India” and asked New Delhi to stop its “regulatory assault on Chinese companies”.

“The impression that Chinese and other foreign companies could be intentionally targeted and suppressed isn’t something good or favourable for India,” the paper said. “It is of great importance for India to maintain normal and effective communication and coordination with Chinese investors.”

Last month, the ED seized Rs 5,551.27 crore belonging to Xiaomi Technology India Private Limited under the provisions of the Foreign Exchange Management Act,1999. Xiaomi India is a wholly owned subsidiary of the China-based Xiaomi group.

According to the ED, the seized amount was lying in the company’s bank accounts. The agency initiated an investigation in connection with the alleged illegal remittances made by the company in February. Earlier last month, the agency questioned Manu Kumar Jain, Xiaomi’s global vice-president, in the case.

In a statement, the ED had said, “The company started its operations in India in the year 2014 and started remitting the money from the year 2015. The company has remitted foreign currency equivalent to INR 5,551.27 crore to three foreign [sic] based entities, which include one Xiaomi group entity, in the guise of royalties. Such huge amounts in the name of royalties were remitted on the instructions of their Chinese parent group entities. The amount remitted to other two US-based unrelated entities was also for the ultimate benefit of the Xiaomi group entities.”

“Xiaomi India procures completely manufactured mobile sets and other products from manufacturers in India. Xiaomi India has not availed of any service from the three foreign [sic] based entities to whom such amounts have been transferred. Under the cover of various unrelated documentary façades 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. The company also provided misleading information to the banks while remitting the money abroad,” the ED statement said.


https://indianexpress.com/article/business/enforcement-directorate-denies-xiaomis-charges-of-coercion-during-forex-probe-7908400/

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