The Enforcement Directorate on April 30 said it has seized Rs 5,551.27 crore from Xiaomi India, the local arm of the Chinese gadget giant, in connection with "illegal outward remittances made by the company".
The seizure was made from the company's bank accounts under provisions of the Foreign Exchange Management Act (FEMA), the federal probing agency said in a statement.
The investigation into the alleged illegal remittances was initiated in February this year, the ED said, adding, "the company has remitted foreign currency equivalent to Rs 5551.27 crore to three foreign based entities which include one Xiaomi group entity in the guise of royalty."
"Such huge amounts in the name of royalties were remitted on the instructions of their Chinese parent group entities," it said.
The amount remitted to "other two US-based unrelated entities" were also for the "ultimate benefit of the Xiaomi group entities", the agency further noted.
Xiaomi India, which is distributor of mobile phones in India under the MI brand, began operations in the country in 2014 and has been making outward remittances since 2015, the ED said.
"Xiaomi India has not availed any service from the three foreign based entities to whom such amounts have been transferred, it claimed, adding that "under the cover of various unrelated documentary façade created amongst the group entities", the company remitted this amount in guise of royalty abroad which constitute violation of Section 4 of the FEMA.
"The company also provided misleading information to the banks while remitting the money abroad," the ED added.
Xiaomi India was yet to issue a statement on the agency's action at the time of writing this report.