All Royalty Payments Are Legitimate: Xiaomi India On Seizure Of Funds By ED

Mobile manufacturer Xiaomi India has issued a clarification on seizure of its funds worth INR 5,551.27 Cr by the Enforcement Directorate (ED) and said that all its royalty payments are legitimate.

In a statement, Xiaomi said that it had inked a legal contract with Qualcomm Group (USA) to license intellectual property (IP) for manufacturing smartphones. Both the companies believe that it is a legit commercial arrangement from Xiaomi India to pay the royalty money to Qualcomm. 

Out of the INR 5,551.27 Cr that has been seized by ED, over 84% were royalty payments made to Qualcomm for using the in-licensed technologies including standard essential patents (SEPs) and IPs in Xiaomi India’s smartphones, the statement added.

The said technologies are deployed across the smartphone industry globally. In the absence of these technologies, Xiaomi’s smartphones would not have worked in India, according to the statement. 

“These technologies and SEPs are used across the entire global smartphone industry. Without these technologies, our smartphones would not have worked in India,” the company said.

Xiaomi said that all royalty payments made by it were related to its sales and were not for any other foreign countries, and added that this was also confirmed by third-party provider Qualcomm. 

The Chinese smartphone manufacturer added that all royalty payments were made through the Reserve Bank of India’s approved banking channels. 

“Moreover, we would like to clarify that Xiaomi Technology India Private Ltd does not own or hold any assets outside India. Hence, as per our understanding the Section 4 of FEMA does not even apply in this situation,” the statement said.

Xiaomi said it will continue to use all means to protect the reputation and interests of the company and its stakeholders, adding that it is committed to work with the authorities to resolve all the issues.

Last week, the ED said that the FEMA authority had confirmed seizing INR 5,551.27 Cr funds of Xiaomi India under the FEMA investigation. 

“The Authority, while confirming the seizure of INR 5551.27 Cr, held that ED is right…foreign exchange equivalent to INR 5,551.27 Cr has been transferred out of India by Xiaomi India in an unauthorised manner and is held outside India on behalf of the group entity in contravention of Section 4 of the FEMA, 1999 and the same is liable to be seized in terms of provisions of Section 37A of the FEMA,” the ED said in a statement.

In July, the Karnataka HC had asked the competent authority to take decision on Xiaomi’s fund seizure within 60 days. 

The ED has alleged that the Chinese smartphone company remitted INR 5,551.27 Cr as royalty money to three companies, including its parent company Xiaomi back in China, without availing any service from them. 

The Chinese smartphone maker is also accused of providing false information to the Indian banks while transferring the said amount abroad. 

Apart from Xiaomi, a slew of Chinese players such as Oppo, Huawei and Vivo, among others, are also under the radar of the ED and other regulatory bodies of India.