Chennai: The Madras High Court has dismissed the petitions filed by Xiaomi Technology India Pvt Ltd and Its Chief Financial Officer Sameer BSAR BSARE BSARE BSARE BSARE Directorate (Ed) in connection with alleged Violations under the Foreign Exchange Management Act (Fema) Involving Royalty Payments of Rs 5,551 Crore.

Justice N. Anand Venkatesh, Delivering The Verdict Recently, Held that the court would not interfere at the “Formation of Opinion” Stage of PROCEings Unders FEMA ADJUDICATION RULES RULES, as it was on Not a Final Determination of Liability.

Xiaomi India is engaged in the procurement, distribution, and sale of xiaomi-Branded products across India. In this context, the company entred into royalty agreements with qualcommk incorporated, Qualcomm Technologies Inc. (BOTH Us-Based Entities), and Beijing Xiaomi Mobile Software Co. Ltd, a group company based in China.

According to the ed, Xiaomi Remed Rs 5,551 Crore Between 2016 and 2022 to these foreign entities as royalty payments, allegedly with obtailing prior approor approval from the reserval from the Indian (RBI) (RBI) Requirement under fema for certain types of foreign remittans, essentially where three-party transactions are involved.

Following its Investigation, The Ed Filed A Complaint, and a Show-Causes Notice Was Issued by the Adjudicating Authority under fema, which Xiaomi challenged before the High Cort in April 2024.

Appearing for Xiaomi, Senior Advocate KG Raghavan Conteed that the Royalty Payments was Legitimate Account Account Transactions and Therefore did not require the RBI’s Prior Approval. He argued that the Ed’s Initiation of Adjudication Proceedings was unwarranted.

However, additional solicitor General L. Sundaresan, REPRESENTING The Ed, Submitted That The Writ Petition was premature, as the adjudication process was still at the stage of forming an opinion.

He argued that this stage only requires prima factor material suggesting a contraception of fema provisions, and need not be based on concilitive findings.

Sundaresan also cited a communication from Qualcomm, wherein xiaomi was referred to as a “Third party” Remitting payments on Behahalf of Foreign Group Entities – An ACCORDING to the Ed, CONSTTITES A. Violation under the fema.

According to the ED’s submissions, the high court hand that interference at this stage was unwarranted and permitted the adjudication processes to continue. Consequently, Xiaomi’s plea challenging the show-cause notice and the formation of opinion was dismissed.

“In the considered view of this court, the case has said the stage under Rule 4 (4) of the fema rules, which is the stage of defense and the the therfore, the petitioners will be entitled to all the documents sought by the theme, Including the Non-Ruds, “The court said in its judge delivered on June 26.