The Karnataka High Court has put the ED’s last week seizure of Xiaomi India assets worth $725 million (about INR 5,51 crores) on hold. Much to its chagrin, Xiaomi has been facing a lot of challenges in India lately. The ED (Enforcement Directorate) has accused the company of violating the Indian foreign exchange law. According to the department, Xiaomi India sent INR 5,551 crores to its parent companies in a bid to avoid tax in the country. As a result, the ED seized assets worth INR 5,551 crores of Xiaomi Technology India Private Limited.
The department claims that the company was illegally sending funds to three foreign entities in the form of royalty payments. Moreover, one of the receivers of these funds turned out to be a Xiaomi group entity. However, Xiaomi has denied these allegations in its statement. The company clarified that its royalty payments and statements to the banks are all truthful and confirming to the rules. Xiaomi India went on to file a challenge against ED’s decision in the Karnataka High Court. Now, a report by Reuters sheds more light on the challenge.
Karnataka High Court Puts ED’s Seizure Of Xiaomi India Assets On Hold
The report confirms that on May 5 the High Court of the southern Karnataka state put a hold on ED’s seizure of the funds from the company’s account. The next hearing is slated to take place on May 12, according to the Karnataka court’s website. In response to ED’s action, Xiaomi said that it wasn’t doing anything illegal. Also, it insists that the royalty payments and bank statements in question are genuine. Despite getting some relief from the High Court, it is worth noting that Xiaomi will have to share details about its royalty payments and fund transfers with ED and Indian authorities. On Thursday, a judge put the ED’s decision on hold after hearing the company’s lawyers.
This piece of information comes from two unnamed sources who weren’t authorized to share these details with the media. Notably, Xiaomi has been on ED’s radar since December 2021 after it raided the company’s office. Interestingly, ED raided the offices of Oppo and Huawei as well. However, the department launched an investigation into Xiaomi India’s operation after discovering irregularities in its records. Interestingly, former Xiaomi India Director Manu Kumar Jain was also under investigation for breaching India’s foreign exchange laws.
As per the ED, Xiaomi India has sent money to three entities abroad without availing of any services. To recall, Xiaomi made its debut in the Indian market in 2014 and is now one of the country’s top smartphone manufacturers. The company has a notable 24 percent market share in the smartphone industry in India. Furthermore, the annual turnover of the company is reportedly around a whopping INR 34,000 crores.