India court declines relief to Xiaomi over $676 mln asset freeze

BENGALURU, Oct 6 (Reuters) – An Indian court on Thursday refused to lift the freeze on $676 million worth of Xiaomi Corp (1810.HK) assets, despite the Chinese smartphone group saying the enforcement action was banned have “effectively ceased” operations. its main Indian market.

India’s federal financial crimes enforcement agency, the Enforcement Directorate, froze Xiaomi’s Rs. 55.51 billion in assets in April, accusing the company of making illegal remittances to foreign companies by disguising them as royalties. Last week, an appeals panel upheld the seizure.

Xiaomi, which denies any wrongdoing, challenged the asset freeze in the southern state of Karnataka’s High Court, saying in its lawsuit that it “is grossly disproportionate and has effectively halted the company’s operations.”

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Xiaomi and Samsung are leaders in the Indian smartphone market, the second largest in the world after China, based on data from Counterpoint, with 18% share each.

On Thursday, Xiaomi’s lawyer Udaya Holla tried to end the freeze by seeking relief from the judge, but the court said the company must first provide bank guarantees for the $676 million frozen assets.

Holla told the court such bank guarantees would mean depositing the full amount, making it harder for the company to function, pay salaries and buy inventory ahead of the Hindu Diwali festival — when consumer sales are booming in India.

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The judge refused immediate relief and adjourned the case until October 14.

Nargund MB, one of India’s additional Attorneys General representing the Enforcement Directorate, asked the court not to grant immediate discharge to Xiaomi and also called for the bank guarantees.

Xiaomi did not immediately respond to a request for comment.

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

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Many Chinese companies are struggling to do business in India due to political tensions following a border dispute in 2020. India has cited security concerns as it has since banned more than 300 Chinese apps, including popular ones like TikTok, and has also tightened rules on Chinese companies investing in India.

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Additional reporting by Abhirup Roy; Edited by Aditya Kalra and Jane Merriman

Our standards: The Thomson Reuters Trust Principles.

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