Following ED Action, Xiaomi India Claims That Royalty Payments For IP Are Lawful

Last Updated on May 2, 2022 by Anu Joy

Despite record sales and growth figures in the country, Xiaomi India’s prospects appear bleak. The company had previously been raided by various government agencies, and now India’s Enforcement Directorate (ED) has announced that it has seized ₹5551.27 Crore from Xiaomi India’s bank accounts under the Foreign Exchange Management Act (FEMA) in connection with the company’s illegal outward remittances.

According to the government agency, three companies benefited from overseas remittances. The ED stated that the funds transmitted to two unrelated entities in the United States were also for the benefit of the Xiaomi group firms. This comes after the ED questioned Xiaomi’s global vice president, Manu Kumar Jain, earlier this month at its regional office in Bengaluru.

In their statement, ED said, “Under the cover of various unrelated documentary facade created amongst the group entities, the company remitted this amount in the guise of royalty abroad which constitute a violation of section 4 of the FEMA”. Xiaomi, as expected, has rejected this in a statement, claiming that the royalty payments are all legitimate and are given for in-licensed technology and intellectual property (IP) utilised in its Indian version products. The company added that it is working with the authorities to clear up any confusion.

In a statement put out on their social media channels, Xiaomi said, “As a brand committed to India, all our operations are firmly compliant with local laws and regulations. We have studied the order from government authorities carefully. We believe our royalty payments and statements to the bank are all legit and truthful. These royalty payments that Xiaomi India made were for the in-licensed technologies and IPs used in our Indian version products. It is a legitimate commercial arrangement for Xiaomi India to make such royalty payments. However, we are committed to working closely with government authorities to clarify any misunderstandings”.