The Directorate of Enforcement (ED) has seized Rs.5551.27 crore of Xiaomi Technology India Private Limited under the provisions of Foreign Exchange Management Act,1999, the federal agency said in a statement Saturday. Xiaomi India is a wholly owned subsidiary of China based Xiaomi group.“This amount of Rs. 5551.27 Crore lying in the bank accounts of the company has been seized by the ED,” the statement released by the agency read. ED had initiated investigation in connection with the illegal remittances made by the company in the month of February this year. Sources said the agency is investigating the company’s foreign funding, shareholding, its financial statements and related activities. Earlier this month, the agency had summoned Manu Kumar Jain, Xiaomi’s global vice-president. Jain’s statement was recorded at the agency’s Bengaluru office. According to the agency, the company started its operations in India in the year 2014 and started remitting the money from the year 2015. 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. The amount remitted to other two US based unrelated entities were also for the ultimate benefit of the Xiaomi group entities,” the statement added. The probe has also found that The Xiaomi India is a trader and distributor of mobile phones in India under the brand name of MI. The Xiaomi India procures completely manufactured mobile sets and other products from the manufacturers in India. The Xiaomi India has not availed any service from the three foreign based entities to whom such amounts have been transferred. “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 said. The ED’s probe follows investigations carried out by the income tax (IT) department, which had raided these companies in the past, people familiar with the developments told ET. Tax sleuths had claimed to have seized data allegedly corroborating charges of tax evasion during the searches.The government banned short-form video apps TikTok and SnackVideo in 2020, but a similar app – Zili – continues to be operated by Xiaomi.The I-T department said its searches had brought to fore a unique modus operandi – whereby foreign funds were introduced in the books of the Indian company. However, the source of such funds is “of doubtful nature”, it said.“The quantum of such borrowings is about Rs 5,000 crore, on which interest expenses have also been claimed,” it added.The I-T department also said that one of the companies had inflated expenses and payments on behalf of associated enterprises, which led to reduction in taxable profits of the Indian mobile handset manufacturer. “Such an amount could be in excess of Rs 1,400 crore,” it said.