Karnataka HC Rejects Xiaomi’s Challenge to $676 Million Asset Freeze: Report

Karnataka High Court has rejected China-based Xiaomi’s petition challenging the seizure of $676.35 million (roughly Rs. 5,500 crore) by the Enforcement Directorate, news website Live Law reported on Friday.

India’s federal financial crime agency froze Xiaomi’s assets last year, alleging the company had made illegal remittances to foreign entities by passing them off as royalty payments. The company denies any wrongdoing.

Xiaomi had said in its legal filing that the asset freeze “is severely disproportionate and has effectively halted the operations” of the company.

Xiaomi and Samsung are market leaders in India’s smartphone market, the world’s second biggest after China, based on data from Counterpoint, with an 18 percent share each.

In October, last year, Xiaomi’s lawyer Udaya Holla had sought to end the freeze by seeking relief from the judge, but the court had said the company must first provide bank guarantees covering the $676 million in assets that are frozen.

Holla had told the court such bank guarantees would mean depositing the entire amount, making it difficult for the company to function and pay salaries and make inventory purchases ahead of Hindu festival of Diwali — when consumer sales boom in India.

The judge had declined any immediate relief, and had then adjourned the case until October 14. Nargund M B, one of India’s Additional Solicitor Generals, who was representing the Enforcement Directorate, had urged the court not to grant any immediate relief to Xiaomi, and had also asked for the bank guarantees.

Xiaomi has previously said its royalty payments were all legitimate and truthful, adding it will “continue to use all means to protect the reputation and interests.”

Many Chinese companies have struggled to do business in India due to political tensions following a border clash in 2020. India has cited security concerns in banning more than 300 Chinese apps since then, including popular ones such as TikTok, and also tightened rules for Chinese companies investing in India.

© Thomson Reuters 2023