HomeNewsXiaomi India in deep waters, ED issues show cause notice

Xiaomi India in deep waters, ED issues show cause notice

Xiaomi India has been issued a show cause notice over ED’s findings regarding the Chinese manufacturer’s FEMA violation.


  • Xiaomi India has been issued a Show cause notice by the court
  • ED had seized over Rs 5,551 crore of Xiaomi India in its bank accounts

Xiaomi India seems to be in trouble as India’s Enforcement Directorate has issued a show cause notice to Xiaomi Technology India Ltd and three foreign banks – Citi bank, HSBC Bank and Deutsche Bank AG. The entities have been issued the notice with regards to a Foreign Exchange Management Act violation, amounting to the equivalent of Rs 5551.27 Crores.

As an explainer, the show cause notice is issued by the Court, requiring a party to appear before the court and explain why a certain course of action should not be taken against it. If the party cannot convince the court through evidence or fails to appear, that course of action is taken.

The ED also posted a tweet informing the general public about the show cause notice being filed against Xiaomi. The violation has been done by Xiaomi, however, the banks listed above received their orders since they were also involved in the violation. According to ED, the banks allowed foreign remittances without obtaining any Technical Collaboration Agreement.

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The authority also notes that the payment of royalty is nothing but means for transferring the foreign exchange out of India, which is a direct violation of the provisions under the FEMA.

The issues with Xiaomi have been continuing since February of last year when it was reported that the agency was looking into existing business structures between Xiaomi India, its contract manufacturers and its parent entity in China, according to the first source. The source of the report also said that fund flows between Xiaomi India and its parent entity, including royalty payments, were being checked.

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