The show cause notices have been issued to Manu Kumar Jain, former MD, and Sameer B Rao, director and chief financial officer. Notices have also been sent to CITI bank, HSBC Bank and Deutsche bank AG for violation of Section 10(4) and 10(5) of FEMA by allowing foreign remittances in the guise of royalty abroad without conducting due diligence and obtaining any underlying Technical Collaboration Agreement from the company, the ED said in a statement.

Last year, the the federal probe agency had seized ₹5,551.27 crore belonging to the ‘wholly-owned subsidiary of China-based Xiaomi group’ lying under provisions of FEMA. The probe agency said the money was in bank accounts belonging to the Chinese smartphone giant and had been seized in connection with alleged ‘illegal outward remittances’ in February.

“The authority while confirming the seizure held that ED is right in holding that foreign exchange equivalent to ₹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 showcause notice is issued after the completion of the ED investigation and once it is settled, an accused is required to pay penalty.