Home / News / India /  84% of 5,551 crore seized by ED was royalty payment to Qualcomm: Xiaomi

Chinese smart devices firm Xiaomi on 2 October said that over 84 per cent of the 5,551.27 crore seized by the Enforcement Directorate belonged to the royalty payment made to US chipset company Qualcomm.

Earlier, the central probing agency approved an order of seizure of over 5,551 crore worth of deposits of Chinese mobile phone manufacturer Xiaomi under the Foreign Exchange Management Act (FEMA). This is highest amount frozen till date in India.

The Chinese phone maker was charged with remitting foreign currency equivalent to 5,551.27 crore to three entities in the guise of royalty.

ALSO READ: Enforcement Directorate approves seizure of Xiaomi's asset worth 5,551.27 crore

"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," Xiaomi said in a statement.

Xiaomi India is an affiliate and one of the Xiaomi Group companies, which entered into a legal agreement with Qualcomm Group (USA) to license IP for manufacturing smartphones, the Chinese firm said.

Both Xiaomi and Qualcomm believe that it is a legitimate commercial arrangement for Xiaomi India to pay Qualcomm royalty, the statement said.

"Of the entire 5,551.27 crore Xiaomi India paid to foreign entities, more than 84 per cent 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," Xiaomi said.

According to the details, the technologies and standard essential patents (SEPs) are used across the entire global smartphone industry. If absence of these technologies, our smartphones would not have worked in India, add the company's statement.

"All royalty payments made by Xiaomi India were only related to sales done by Xiaomi India, and not for any other countries or regions. This has also been confirmed by the Qualcomm Group (USA). These royalty payments were made via RBI approved and mandated banking channels and are legitimate commercial arrangements," the statement said.

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While ED probe says Xiaomi started its operations in India in the year 2014 and started remitting money in 2015.

Apart from this, ED alleged that the firm has remitted foreign currency equivalent to 5,551.27 crore to three foreign-based entities, including one Xiaomi Group entity in the guise of royalty.

On 29 April this year, the probing agency first issued the order of seizure of these bank deposits under the FEMA. Later order of seizure was sent for approval of the competent authority as it is required under the law that regulates foreign exchange violations in the country.

Under FEMA, a competent authority is an officer appointed by the central government to adjudicate an ED seizure order issued under the law. Such an officer should not be below the rank of a joint secretary.

While confirming the seizure order, the authority held the ED is "right in holding" that foreign exchange equivalent to 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 in contravention of Section 4 of the FEMA.

Meanwhile, Xiaomi claimed Xiaomi Technology India Private Limited does not own or hold any assets outside India.

"Hence, as per our understanding, Section 4 of FEMA does not even apply in this situation. We will continue to use all means to protect the reputation and interests of the Company and our stakeholders. We remain committed to working with various authorities to resolve the issue," Xiaomi said.

With PTI inputs.

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