Under the FEMA, a show-cause notice is issued after the completion of the ED investigation and once it is settled, an accused is required to pay penalty. 
Special 
Under the FEMA, a show-cause notice is issued after the completion of the ED investigation and once it is settled, an accused is required to pay penalty. The Enforcement Directorate (ED) on Friday said it has issued show-cause notices to Chinese mobile manufacturer Xiaomi, its chief financial officer and director Sameer Rao, former MD Manu Kumar Jain and three foreign banks for alleged foreign exchange violation of more than Rs 5,551 crore.
The adjudicating authority under the Foreign Exchange Management Act has issued show-cause notices to Xiaomi Technology India Private Limited, the two executives, CITI Bank, HSBC Bank and Deutsche Bank AG, the agency said in a statement.
The federal probe agency had seized Rs 5,551.27 crore worth of funds of Xiaomi Technology India Private Limited lying in its bank accounts under the FEMA for ''unauthorised'' remittance of this amount in guise of royalty abroad.
''The competent authority, appointed under Section 37A of the FEMA, has confirmed the said seizure order. ''The authority while confirming the seizure held that ED is right in holding that foreign exchange equivalent to Rs 5,551.27 crore has been transferred out of India by Xiaomi India in an unauthorised manner and is held outside India on behalf of the group entity in contravention of section 4 of FEMA, 1999 and the same is liable to be seized in terms of provisions of Section 37A of the FEMA,'' it said.
Under the FEMA, a show-cause notice is issued after the completion of the ED investigation and once it is settled, an accused is required to pay penalty, which could be three times the amount contravened.
The agency said the competent authority also observed that the payment of royalty was nothing but a tool for transferring the foreign exchange out of India and the same was in ''blatant'' violation of the FEMA provisions.
The ED said its investigation, launched last year, has found that the company had remitted foreign currency equivalent to Rs 5,551.27 crore to three foreign-based entities, including a Xiaomi group entity, in the guise of royalty.
''Under the cover of various unrelated documentary façade created amongst the group entities, the company remitted this amount in the guise of royalty abroad, which constitutes violation of section 4 of the FEMA,'' it said.
With inputs from PTI
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