According to reliable sources, nearly 84 percent of the seized royalty remittances were made to US-based chipmaker Qualcomm Group after the Enforcement Directorate (ED) seized nearly Rs 5,551.3 crore from Xiaomi India under the Foreign Exchange Management Act (FEMA) for illegal remittances to foreign entities.
According to sources close to the situation, Qualcomm was paid Rs 4,663.1 crore using appropriate banking channels. Xiaomi employs Qualcomm chipsets in the majority of its smartphones and pays a royalty to the California-based company for a variety of licensed technologies, including standard essential patents and other intellectual property (IP).
Patent infringement can be prosecuted against any smartphone or consumer electronics manufacturer that does not pay royalties.
Xiaomi did not any third-party services for the payment
In a press release, the watchdog had said that “Xiaomi India has not availed any service from the three foreign-based entities to whom such amounts have been transferred”.
In a statement, Xiaomi India said it can’t comment as the matter is in the court. “This matter is subjudice and under the consideration of the court of law. We refuse to comment on this,” the company told IANS.
Last Monday, the Karnataka High Court granted Xiaomi India permission to take out bank overdrafts and make payments. The court, however, rejected the payment of a technological royalty. The interim order was also extended till May 23 by Vacation Judge Justice S. Sunil Dutt Yadav, who remarked that the dispute is now between the banks and the petitioner company. The court had granted a conditional stay on the Enforcement Directorate’s (ED) order to take Rs 5,513.3 crore on April 29. After invoking the Foreign Exchange Management Act of 1999, the ED took the action.
Xiaomi India, according to senior attorney S. Ganeshan, is being targeted because it is a Chinese company, whereas other companies are allowed to pay technology royalties. He said that banks are refusing to allow Xiaomi to make transfers in foreign currency for imports as a result of the court’s prior interim decision on May 5.
He explained that as part of the manufacture and marketing of cellphones, the corporation is compelled to make payments to overseas companies. Xiaomi said that royalty payments to three foreign entities would not violate the FEMA Act. The corporation also claimed that it was approved as a value-added activity by the IT department.
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