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According to a statement, India’s anti-money-laundering agency took control of Xiaomi Technology India’s bank accounts under the provisions of the Foreign Exchange Management Act.
In the latest clash with a Chinese company over market activities, India accused Xiaomi Corp. of violating the country’s foreign-exchange laws and seized 55.51 billion rupees ($726 million) from a local unit of the smartphone maker.
According to the Enforcement Directorate, the company’s local unit remitted money to three foreign-based entities with ties to Xiaomi, falsely claiming it was for royalty payments.
“Xiaomi India purchases completely manufactured mobile sets and other products from Indian manufacturers,” the agency stated in a statement. “The company also provided false information to banks while remitting funds abroad.”
Since the two countries’ troops clashed in 2020, India has taken a hard line against Chinese companies operating within the country. More than 200 Chinese mobile applications have been blacklisted in India, including shopping services from Alibaba Group Holding Ltd., the TikTok short video hit from ByteDance Ltd., and apps used on Xiaomi phones.
China’s Foreign Minister, Wang Yi, visited his counterpart, Subrahmanyam Jaishankar, for the first time since border tensions erupted last month in an effort to reset the relationship.
Under the provisions of the Foreign Exchange Management Act, 1999, the ED seized Rs.5551.27 Crore from M/s Xiaomi Technology India Private Limited’s bank accounts in connection with the company’s illegal outward remittances.
Xiaomi has challenged India’s asset seizure, claiming that its royalty payments are justified and that its statements to financial institutions are correct. Xiaomi has been one of the most successful smartphone brands in the rapidly growing market, growing to become the country’s largest by shipment volume.
“All of our operations are strictly in accordance with local laws and regulations,” Xiaomi India stated on Twitter. “These royalty payments were made by Xiaomi India for in-licensed technologies and IPs used in our Indian version products.”
Such royalty payments are a legal commercial arrangement for Xiaomi India. “The company did not say what steps it would take next or whether it would seek legal redress to reclaim its assets.”
“We are focused on working intimately with government authorities to clear up any false impressions,” as indicated by the explanation.