Earlier, Rs 653 crores were fined, and now ED summoned Xiaomi’s head, Manu Jain, questioning about foreign exchange law

ED summoned Xiaomi’s head, Manu Jain, who was probed since the beginning week of February this year. The Enforcement Directorate (ED), India’s federal financial-crime fighting department and officials, has recently summoned Xiamoi’s former India head Manu Jain for the investigatory process. As per to the reports, the investigatory process is about Xiaomi’s business practices conform to India’s Foreign Exchange Policies and Laws. 

It is very much known that Xiaomi, a Chinese company, has been under an ongoing investigation by the officers done by the Enforcement Directorate since February this year, and Manu Jain has been asked to mark his appearance before the officers now. While talking about Manu, Jain is popularly regarded as the global vice president for Xiaomi and is residing in Dubai. Although right now, Manu Jain is present in India in the present scenario. As per the reports, the purpose of his current visit to India was not revealed, and it can’t be said that he is in India due to the ongoing crisis and the summon given by ED. 

Why did Ed summoned Xiaomi’s India Head?

A notice was sent by the Enforcement Directorate to Xiaomi earlier in February, addressing Manu Jain, who was the managing director for Xiaomi in India. As per the reports in the notice sent by the department, he was asked for different other company documents, which included details of foreign funding, shareholding and funding patterns, financial statements and information about main performing executives.  

In addition, the most important, the Enforcement Directorate is doing an investigation is about Manu Jain. It was pointed out in a statement that in the existing business structure in between Xiaomi India, its contract manufacturers and its parent entity in China and all those funds that flow between Xiamoi India and the parent entity, including the royalty payment as well. 

While talking about Xiaomi, it said that the company abides by all the Indian laws and claiming that it is fully compliant with all the regulations. The company added that they co-operate with different other authorities and departments in their investigation process to ensure they have all the requisite information.

The ED summoned Xiaomi’s head with a fine of Rs 653 crores by the Ministry of Finance on charges of evading customs duty earlier in January this year. China state-affiliated media Global Times stated that Xiaomi, into a statement on the fine. It mentioned that the penalty and the fine were charged due to disagreement on how to determine the price for the goods imported from foreign countries, and because of this, ED summoned Xiaomi’s India head. 

While talking about the matter that ED summoned Xiaomi’s India head, the Chinese firm had pointed out with its statement that determining whether the royalty and license fees should be imposed and included in the price of imported goods was more of a complex and technical challenge across the whole world. 

Before ED summoned Xiaomi’s head fine was imposed on Xiamoi. Regarding the fine imposed on Xiaomi, those fines involved paying back the import taxes on the royalty and licence fees from April 1, 2017, to June 30, 2020. ED summoned Xiaomi’s head after the statement from the Indian company came and was investigated following an intelligence report that was accusing that the company of evading other custom charges by the was of undervaluation. 

Although the investigation was initiated by The Directorate of Revenue Intelligence (DRI), and the process was initiated against Xiaomi India and its contract manufacturers and conducted searches on the smartphone maker’s premises. Talking about the company, then Xiaomi was also recalled as one of the most renowned and famous companies that are amongst other companies like Oppo, was to be raided by the Income Tax (IT) department across premises in December last year. However, before ED summoned Xiaomi’s head, I-T officials conducted the raids following several alleged violations. 

In addition, searches were conducted at manufacturing units, godowns and various corporate offices and departments of Chinese mobile phone companies that included famous names like Xiaomi and Oppo. Now, because the ED summoned Xiamoi’s India Head, Manu Jain, the news has also emphasised that the company has recently faced a loss. The company lost its chief marketing officer Jaskaran Singh Kapany earlier. Talking about Jaskaran Singh Kapany, he joined and started working with Xiaomi in June 2021. 

However, according to the reports, it is suggested that Kapany’s decision to move on, that appears to be unrelated to the I-T raid and the investigatory process of the Enforcement Directorate, with the people in the company feeling that the CMO wanted to explore more about different other opportunities outside of the world of Chinese smartphone category. 

After ED summoned Xiaomi’s head Manu Jain, he did not respond to the allegations and request for comment. On the other hand, India’s Enforcement Directorate also did not respond, although the agency has not revealed details publically while the investigatory process was still ongoing.

However, the investigation and the officials are looking into the existing business structures that are between Xiaomi India, all its contracts and its parent entity in China.