The Karnataka High Court has dismissed the petition filed by Chinese company Xiaomi challenging the seizure of $676.35 million (approximately Rs 55 billion) by the Enforcement Directorate, news website Live Law reported on Friday.
India’s federal financial crimes agency last year froze Xiaomi’s assets, alleging that the company had made illegal transfers to foreign entities, passing them off as royalty payments. The company denies any wrongdoing.
Xiaomi had argued in its legal filings that the asset freeze was “highly disproportionate and has effectively halted the company’s operations.”
Xiaomi and Samsung are the market leaders in the smartphone market in India. According to Counterpoint data, it is the second largest market in the world after China, with each having a share of 18 percent.
In October last year, Xiaomi’s lawyer Udaya Holla attempted to lift the freeze by asking the court for damages. However, the court ruled that the company must first provide bank guarantees to cover the $676 million in assets that had been frozen.
Holla had told the court that such bank guarantees would mean the entire amount would have to be deposited, making it difficult for the company to function, pay salaries and purchase inventory before the Hindu festival of Diwali, when consumer sales in India increase.
The judge had rejected any interim relief and adjourned the case till October 14. Nargund MB, one of India’s Additional Solicitor Generals, representing the Enforcement Directorate, had urged the court not to grant any interim relief to Xiaomi and had also sought the bank guarantees.
Xiaomi has previously said that all royalty payments are legitimate and fair and that the company will “continue to use all means to protect its 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 since banned more than 300 Chinese apps, including popular ones like TikTok, over security concerns and has imposed stricter rules on Chinese companies investing in India.
© Thomson Reuters 2023
