New Delhi: The Foreign Exchange Management Act (FEMA)’s authority has accepted an order to seize deposits from Chinese mobile phone company Xiaomi worth over Rs 5,551 crore, the most sum to be frozen in India to date, according to the ED on Friday.

The popular Chinese phone maker was accused by the agency of paying three organisations — one Xiaomi Group firm and two unrelated US-based entities — in the form of royalties in foreign currency worth Rs 5,551.27 crore.

As required under the law governing foreign exchange crimes in the nation, the Enforcement Directorate (ED) initially issued the order of seizure of these bank accounts on April 29 under the FEMA and afterwards sent it for approval of the competent authority.

“The competent authority appointed under section 37A of the FEMA has confirmed the seizure order of Rs 5551.27 crore (dated 29.04.2022) passed by the Directorate of Enforcement against Xiaomi Technology India Private Limited under the provisions of FEMA.” “This is the highest amount of seizure order in India which has been confirmed by the authority till date,” the federal agency said in a statement.

An official chosen by the national government to decide on an ED seizure order issued in accordance with the legislation is referred to as a competent authority under the FEMA. An official of this kind shouldn’t have a lower position than joint secretary.

According to the authority, which confirmed the seizure order, the ED is “right in holding” that Xiaomi India transferred foreign currency worth Rs 5,551.27 crore out of India in a “unauthorised” manner and that it is being held outside of India on behalf of the group entity in violation of Section 4 of the FEMA.

The agency claimed that none of the three foreign-based companies to which these funds were routed provided any services to Xiaomi India.

“Under the cover of various unrelated documentary facade created amongst the group entities, the company remitted this amount in guise of royalty abroad which constitute violation of Section 4 of the FEMA.” “The company also provided misleading information to the banks while remitting the money abroad,” it alleged.

According to the agency, the responsible authority also noted that paying royalties is nothing more than a means of transferring money out of India and that doing so is a “blatant violation” of FEMA’s rules.

According to an investigation, Xiaomi began operating in India in 2014 and began sending money there in 2015.

Three foreign-based organisations, including one Xiaomi Group business, received payments from the company in foreign currency totaling Rs 5,551.27 crore under the pretence 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 were also for the ultimate benefit of Xiaomi group entities,” it said.

Under the brand name MI, Xiaomi India is a trader and distributor of mobile devices in India. It buys fully assembled mobile phones and other products from Indian producers.

Additionally, Xiaomi India filed a writ case with the Karnataka High Court challenging the ED’s April ruling, which the agency claims was “dismissed” on July 5.