New Delhi, May 16 (IANS) After the Enforcement Directorate (ED) seized nearly Rs 5,551.3 crore from Xiaomi India under Foreign Exchange Management Act (FEMA) for shipments of illegal funds to foreign entities, reliable sources said on Monday that about 84% of seized royalty remittances were made to U.S.-based chipmaker Qualcomm (NASDAQ:) Group.
Sources close to the development told IANS that around Rs 4,663.1 crore was disbursed to Qualcomm through the appropriate banking channels.
Xiaomi uses Qualcomm chipsets in the majority of its devices and pays royalties to the American major for various licensed technologies that include standard essential patents and other intellectual property (IP), beyond the simple use of its chipsets. .
Any smartphone or other consumer electronics company that does not pay royalties can be punished for patent infringement.
However, according to the ED, Xiaomi did not use any of these third-party services.
In a press release, the watchdog had said that “Xiaomi India has not engaged any service of the three overseas-based entities to which these amounts have been transferred.”
In a statement, Xiaomi India said it could not comment as the matter was in court.
“This matter is pending and under review by the court. We decline to comment on this,” the company told IANS.
Last week, in major relief for Xiaomi India, the Karnataka High Court allowed it to take overdrafts from banks and make payments.
However, the court ruled out payment of the technology fee.
The vacation judge, Judge S. Sunil Dutt Yadav, also extended the interim order until May 23 and said the matter was now between the banks and the petitioning company.
The court had granted a conditional stay on the order issued by the Enforcement Department (ED) on April 29 to seize Rs 5,513.3 crore.
The ED took the plunge after invoking the Foreign Exchange Management Act 1999.
Lead Attorney S. Ganeshan argued that Xiaomi India was targeted because it is a Chinese company and other companies are allowed to make technology royalty payments.
Seeking clarification on the earlier May 5 interim order, he argued that banks were not allowing Xiaomi to send foreign currency remittances for imports following the court order.
He explained that the company is required to make payments for foreign companies in connection with the manufacture and marketing of smartphones.
Xiaomi argued that royalty payments made to three overseas companies would not violate FEMA law. The company further maintained that the IT department itself authorized it as a value-added activity.