Xiaomi sent $725M out of India as 'royalties' without approval. It was seized.

Xiaomi became India's best-selling smartphone brand by selling inexpensive phones, but it routed large payments to three overseas entities — including a Xiaomi group company — described as royalties for the use of intellectual property and technology. India's Enforcement Directorate investigated and found the remittances lacked the required Reserve Bank of India approval and any underlying technical collaboration agreement.

In April 2022 the ED seized ₹5,551.27 crore (about $725 million) from Xiaomi India's bank accounts under the Foreign Exchange Management Act (FEMA) — the largest such seizure in India. The ED said the royalty label was a guise: paying royalty, it held, was 'nothing but a tool' for moving foreign exchange out of India in violation of the law.

Xiaomi contested the order. A FEMA competent authority confirmed the seizure in September 2022, holding that the money had been transferred out unauthorisedly and held abroad on behalf of a group entity. The Karnataka High Court dismissed Xiaomi's petition, and the Madras High Court later upheld the ED's action. The ED also issued show-cause notices to Xiaomi, its officials and three banks.

The case is now a standard warning on cross-border structuring: how a payment is labelled does not change what it is, and royalties sent without the right approval and documentation become an unauthorised outflow that a regulator can seize and the courts will uphold.