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Why has ED seized Rs 5551 crore from Xiaomi India? Know all about Foreign Exchange Management Act

The Enforcement Directorate decided to seize over Rs 5,551 crore from Xiaomi India on Saturday under the FEMA Act of Parliament.

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In a major action against the company, the Enforcement Directorate confirmed the seizure of a whopping Rs 5551.27 crore against Xiaomi Technology India Private Limited under the Foreign Exchange Management Act (FEMA) of the Parliament.

The authority appointed under Section 37A of the FEMA Act confirmed the seizure of the mine on Friday, making it the highest amount of seizure orders in India that has been confirmed by the Authority to date, as per ANI reports.

According to the authority, Xiaomi India was attempting to transfer the foreign exchange reserve of the country outside of India, which is in blatant violation of provisions of FEMA. The company unauthorisedly remitted this amount in the guise of Royalty abroad which constitutes a violation of Section 4 of the FEMA.

Defending its case, the company filed a writ petition before the High Court of Karnataka against the said order which was dismissed by the Hon’ble High Court vide order dated July 5, 2022.

Why did ED seize crores of rupees from Xiaomi India?

The seizure of the money was done by the direction of the authority which was formed under the FEMA act, directing the Enforcement Directorate to hold the massive amount from Xiaomi India Technology.

The Authority while confirming the seizure of the hefty amount held that ED is right in holding foreign exchange equivalent to Rs 5,551.27 crore has been transferred out of India by Xiaomi India in an unauthorised manner and is held outside India on behalf of the group entity is in contravention of Section 4 of the Foreign Exchange Management Act, 1999 and the same is liable to be seized in terms of provisions of Section 37A of the FEMA.

The Competent Authority also observed that payment of royalty is nothing but a tool for transferring foreign exchange out of India and the same is in blatant violation of provisions of FEMA.

What is the FEMA Act of the Parliament?

The Foreign Exchange Management Act, 1999, is an Act of the Parliament of India which is designed to maintain the flow and regulation of foreign exchange in the country, keeping in mind the framework of the World Trade Organisation (WTO).

The FEMA act has been designed “to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India.”

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