Karnataka HC Rejects Xiaomi Petition Challenging ED’s $676M Asset Freeze: Report

Karnataka HC Rejects Xiaomi Petition Challenging ED’s $676M Asset Freeze: Report

Karnataka HC Rejects Xiaomi Petition Challenging ED's $676M Asset Freeze: Report

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

India’s federal financial crime agency froze Xiaomi’s assets last year, alleging the company sent illegal remittances to foreign entities masquerading as royalty payments. The company denies any wrongdoing.

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

Xiaomi and Samsung are the leaders in the Indian smartphone market, the second in the world after China, according to Counterpoint data, with an 18% share each.

In October last year, Xiaomi’s lawyer Udaya Holla sought to end the freeze by seeking compensation from the judge, but the court said the company must first provide bank guarantees covering the 676 million dollars of frozen assets.

Holla had told the court that such bank guarantees would mean depositing the full amount, which would make it difficult for the business to operate and pay salaries and make inventory purchases ahead of the Hindu festival of Diwali – when consumer sales explode in India.

The judge denied immediate relief, then adjourned the case until October 14. Nargund MB, one of India’s additional attorneys general, who represented the Enforcement Branch, had urged the court not to grant immediate relief to Xiaomi, and also demanded the bank guarantees.

Xiaomi has previously said its royalty payments are all legitimate and truthful, adding that it “will continue to use all means to protect 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 by banning more than 300 Chinese apps since then, including including popular apps such as TikTok, and also tightened the rules for Chinese businesses. invest in India.

© Thomson Reuters 2023

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