Xiaomi’s Petition Against INR 5,551 Cr Seizure Denied by Karnataka High Court
- ByStartupStory | April 22, 2023
Chinese smartphone manufacturer Xiaomi’s attempt to challenge the seizure of INR 5,551 Cr ($676 Mn) by Indian authorities for violating FEMA guidelines has been denied by the Karnataka High Court. According to a spokesperson for Xiaomi, the company is currently reviewing the situation and awaiting the written order. The spokesperson also stated that Xiaomi’s operations in India are fully compliant with local laws and regulations.
Last April, Xiaomi had INR 5,551.27 Cr seized by the Competent Authority under the Foreign Exchange Management Act, 1999 (FEMA) for violating FEMA guidelines. Despite this, Xiaomi has consistently asserted the legitimacy of its royalty payments, which are at the heart of the issue. In October of last year, the Chinese smartphone maker claimed that all its royalty payments were linked to its sales and were deemed valid by third-party provider Qualcomm. Xiaomi has previously announced its intention to protect its reputation and interests in India, and it is still studying the matter and waiting for the written order from the Karnataka High Court.
Alleging that Xiaomi India had made remittances to foreign companies without receiving any services, the Enforcement Directorate (ED) ordered the seizure of the company’s assets in April last year. However, Xiaomi promptly filed a petition with the Karnataka High Court, which granted a stay on the ED’s seizure order in early May 2022. As a result, the Chinese smartphone market was allowed to continue using its bank accounts for day-to-day activities. The ED’s decision to seize Xiaomi’s assets is still being challenged by the company, which is awaiting the written order from the Karnataka High Court.
In July of last year, the Enforcement Directorate (ED) requested that the competent authority under FEMA be allowed to issue an appropriate order, arguing that Xiaomi had approached the court prematurely. The High Court agreed with the ED’s argument, resulting in FEMA confirming India’s largest-ever seizure in September 2022. Xiaomi then returned to the Karnataka High Court in October seeking interim relief, but its plea was denied. The Chinese smartphone maker’s latest plea has now been rejected altogether by the Karnataka High Court, effectively closing the case.
Xiaomi is not the only Chinese smartphone manufacturer that has come under scrutiny by Indian financial authorities. In July of last year, Vivo was accused by the ED of remitting INR 62,476 Cr to foreign parties, mostly Chinese companies, in the form of royalties to avoid paying taxes in India. The company has denied the allegations. Another Chinese smartphone maker, OPPO, is also under investigation for alleged tax evasion amounting to INR 4,389 Cr in India. Chinese companies operating in India have faced challenges since the 2020 clash between the Indian Army and the People’s Liberation Army of China at the Galwan border. The government has since banned around 300 Chinese apps and prohibited Chinese telecom companies from selling products to Indian telcos in order to safeguard national security.
Calling all entrepreneurs, investors and business owners! The wait is finally over. The 2nd edition of Startup Story B2B Connect is back with a bang – and this time, we’re taking it up a notch. With more startups, more investors and bigger opportunities than ever before, this is your chance to connect, collaborate and take your business to the next level. Get ready for an unforgettable networking experience that’s set to change the game. Stay tuned for all the exciting updates! Register Now Here.
Follow Startup Story
Related Posts
