Indian Court Rejects Xiaomi’s Plea To Overturn $676 Million Asset Freeze
Updated: Dec 19, 2023
Xiaomi India, the local subsidiary of the Chinese tech giant, isn't any closer to getting back the money seized by federal authorities last year.
According to the South China Morning Post, an Indian high court in the state of Karnataka has rejected the company's plea to overturn the seizure of 55.51 billion rupees (US$676 million) by the Enforcement Directorate (ED), the country's federal financial crime agency.
The funds were seized in April 2022 after the ED alleged that Xiaomi India was making illegal remittance payments to three foreign-based entities "under the guise of royalties" – a violation of India’s Foreign Exchange Management Act. The company reportedly also failed to detail what goods or services had been involved in the flagged payments.
"We are studying the matter and waiting for the written order," said a spokesperson for Xiaomi India about the court decision. "We’d like to reiterate that our operations in India are compliant with all local laws and regulations."
Xiaomi India has previously denied any wrongdoing, and maintained that the payments in question were legitimate. In October last year, the company said the payments were "for the in-licensed technologies and intellectual properties used in our Indian version products". The majority of the payments – 84% – supposedly went to semiconductor giant Qualcomm, who has an ongoing partnership with the Xiaomi Group since 2015. That partnership allows the Chinese smartphone maker to access Qualcomm's chip technology in the manufacturing of its products.
Indian tax authorities also alleged that Xiaomi India remitted money abroad to reduce its taxable income. Xiaomi India contested the allegations in court partially winning a separate petition, sparing it from an additional seizure order of 37 billion rupees (US$450 million).
The investigation against Xiaomi and the seizure of its funds last year came amid tensions between India and China. The two neighbouring superpowers have been caught in border disputes for years, but the situation seemingly escalated in 2020 when a skirmish broke out between the country's forces at the Himalayan border. India that same year banned over 50 Chinese apps over security and privacy concerns.
Vivo, another Chinese smartphone maker in India, was similarly targeted by the ED. Dozens of its offices were raided by authorities, with over 100 bank accounts linked to the country's local subsidiary containing over US$50 million being seized. The ED alleged that Vivo India was illegally remitting money to other countries, including China, to avoid paying taxes.
An Indian high court in the state of Karnataka has rejected Xiaomi India's plea to overturn the seizure of 55.51 billion rupees (US$676 million) by the Enforcement Directorate (ED) last year.
The funds were seized after the ED alleged that Xiaomi India was making illegal remittance payments to three foreign-based entities "under the guise of royalties" – a violation of India’s Foreign Exchange Management Act.
"We’d like to reiterate that our operations in India are compliant with all local laws and regulations," said a spokesperson for Xiaomi India.