ED summons Xiaomi’s former India head Manu Jain: What we know so far

The Enforcement Directorate (ED), India’s federal financial-crime fighting agency, has summoned Xiaomi’s former India head Manu Jain for an investigation. According to Reuters, the investigation is on whether Xiaomi’s business practices conform with India’s foreign exchange laws.

Xiaomi, a Chinese company, has been under investigation by the ED since February this year and Jain has been asked to appear before officers now. Jain is currently the global vice president for Xiaomi and lives in Dubai, but he is in India right now. As per Reuters, the purpose of his current visit to India is not clear.

The ED also had sent a notice to Xiaomi earlier in February, addressed to Jain who used to be the managing director for India, asking for various company documents, which included details of foreign funding, shareholding and funding patterns, financial statements and information of key executives, as reported by Reuters.

Most importantly, ED is investigating, as pointed out by Reuters, the “existing business structures between Xiaomi India, its contract manufacturers and its parent entity in China” and the fund flow between Xiaomi India and the parent entity, “including royalty payments."

Xiaomi said in a statement that they abide by all Indian laws and are “fully compliant with all regulations” and added that they are “cooperating with authorities with their ongoing investigation to ensure they have all the requisite information”.

Why Xiaomi?

ED’s summons follows Xiaomi being fined Rs 653 crores by the Ministry of Finance on charges of evading customs duty earlier in January this year. China state-affiliated media Global Times stated that Xiaomi, in a statement on the fine, mentioned that the penalty was due to disagreement on how to determine the price for imported goods.

The Chinese firm had pointed out in its statement that determining whether royalty and license fee should be included in the price of imported goods was a “complex and technical challenge across the world”.

The fines imposed on Xiaomi involved paying back the import taxes on the royalty and license fees from April 1, 2017, to June 30, 2020. The statement from the Indian government came after the company was investigated following an intelligence report accusing the company of evading customs charges “by the way of undervaluation”, as PTI reported. The Directorate of Revenue Intelligence (DRI) initiated the investigation against Xiaomi India and its contract manufacturers and conducted searches on the smartphone maker's premises.

Xiaomi was also one of the companies, besides Oppo, to be raided by the Income Tax (I-T) department across premises in December last year. According to Reuters, I-T officials conducted the raids following several alleged violations. Searches were conducted at manufacturing units, godowns, and corporate offices of Chinese mobile phone companies, which included Xiaomi and Oppo.

Also Read: I-T Department conducting raids on Chinese mobile firms like Oppo, Xiaomi, others

Now with the ED summoning Jain, it has also brought into focus the fact that the company recently lost its chief marketing officer Jaskaran Singh Kapany earlier this month. Kapany had joined Xiaomi in June 2021.

However, as per news reports, it is suggested that Kapany’s decision to move on appears to be unrelated to the I-T raids and the ED investigations with company insiders feeling that the “CMO wanted to explore opportunities outside of the world of Chinese smartphone category."

Also Read: Xiaomi India head Manu Jain summoned by ED in foreign exchange probe

Also Read: Rs 653 cr fine due to disagreement on how to determine price of imported goods: Xiaomi