Indian Court Rejects Xiaomi Plea To Return Seized Funds

An Indian court has rejected a plea by Chinese smartphone maker Xiaomi to return more than $600 million (£482m) in funds that were seized from a local Xiaomi subsidiary last year for alleged foreign exchange violations, amidst political tensions between two of the world’s biggest economies.

India’s federal financial crime agency the Enforcement Directoriate (ED), seized the funds in April of last year after it said an investigation showed years of suspicious payments made by Xiaomi India to three foreign-based entities.

At the time the ED alleged the smartphone maker had hidden the payments “under the guise of royalties” and that they violated India’s Foreign Exchange Management Act.

“We are studying the matter and waiting for the written order,” Xiaomi said of the decision by the High Court of Karnakata on Friday.

‘Compliant’

The company reiterated that its operations in India “are compliant with all local laws and regulations”.

The Enforcement Directorate said the payments date back to 2015, the year after Xiaomi established operations in India, and amount to some 55.51bn rupees ($676m, £543m).

Xiaomi says the payments are legitimate royalty payments, with more than 84 percent going to US chip firm Qualcomm in payment for licensed technologies.

“These technologies and standard essential patents are used across the entire global smartphone industry. Without these technologies, our smartphones would not have worked in India,” Xiaomi said in a statement last October.

Border clash

Chinese firms have faced additional scrutiny in India since a border clash in 2020 inflamed political tensions, leading India to ban more than 300 Chinese apps, including highly popular services such as TikTok.

Xiaomi was India’s top smartphone brand from 2019 to 2022, according to data from Counterpoint Research, but was surpassed by Samsung Electronics in the final quarter of last year.

Xiaomi is now in third place with 16 percent of the market, following fellow Chinese firm Vivo with 18 percent.