Days after facing the seizure of over Rs 5,551 crore worth of deposits, Chinese technology major Xiaomi India has said it was disappointed with the decision of the competent authority of approving such an order.
Earlier the Enforcement Directorate (ED) had issued the order of seizure on April 29 this year under the Foreign Exchange Management Act (FEMA) and later sent it for approval of the competent authority.
Under the law that regulates foreign exchange violations in the country, it is required for ED to send the order for approval. It was found that Xiaomi had made illegal remittances to foreign entities by passing them off as royalty payments. The order was issued under section 37A of the FEMA against Xiaomi Technology India Private Ltd and “is the highest amount of seizure order in India which has been confirmed by the authority till date.”
The company meanwhile claims that the royalty payments and statements to the bank are all legitimate. “We have studied the order from the Competent Authority and are disappointed with the decision as none of the factual and legal contentions raised by us have been addressed. We believe our royalty payments and statements to the bank are all legitimate and truthful,” the company said in a statement.
Xiaomi said over 84% of the total royalty payments made to Qualcomm for patents and IPs were only for the Indian version of smartphones and that without these technologies, its phones would not have worked in India. It also says that the royalty payments were made via RBI-approved banking channels.
Meanwhile, Xiaomi India in its clarification regarding royalty payments said that Xiaomi India is an affiliate and one of the Xiaomi Group companies, which entered into a legal agreement with Qualcomm Group (USA) to licence IP for manufacturing smartphones. Both Xiaomi and Qualcomm believe that it is a legitimate commercial arrangement for Xiaomi India to pay Qualcomm royalty.
According to the company, of the entire Rs 5,551.27 crore Xiaomi India paid to foreign entities, more than 84% were royalty payments made to Qualcomm Group (USA), a third-party US listed company, towards the in-licensed technologies, including Standard Essential Patents (SEPs) and IPs used in our Indian version of smartphones.
Also, these technologies and SEPs were used across the entire global smartphone industry. Without these technologies, smartphones would not have worked in India.
Xiaomi has also clarified that Xiaomi Technology India Private Limited “does not own or hold any assets outside India” and as per the company’s understanding, Section 4 of FEMA does not even apply in this situation. Xiaomi India said that it would continue to work to protect the reputation and interests of the Company and our stakeholders.