Indian court rules against Xiaomi in a case involving the seizure of assets worth $676 million

Xiaomi, a Chinese smartphone manufacturer, has lost a court case in India over the seizure of assets valued at $676 million, according to sources cited by Reuters. Last year, the country’s federal financial crime agency froze Xiaomi’s assets, alleging that the company made illegal remittances to foreign entities by disguising them as royalty payments. The Enforcement Directorate of India claimed that Xiaomi unlawfully began moving money abroad in 2015 while providing misleading information to banks. The company allegedly transferred around $748 million in foreign currency to three businesses, including a Xiaomi group entity, under the premise of royalty payments. Xiaomi has denied the allegations.

The Indian agency claimed that Xiaomi violated Section 4 of the Foreign Exchange Management Act (FEMA), which restricts who can acquire, hold, own, possess, or transfer any foreign exchange, foreign security, or immovable property situated outside India. Xiaomi’s defeat in the court is a significant setback for the company, which is one of the fastest-growing smartphone brands in India. Xiaomi has made significant investments in the country in recent years, including setting up manufacturing facilities, creating jobs, and launching a wide range of affordable smartphones to cater to the country’s price-sensitive consumers.

The case highlights the increasing scrutiny and regulatory challenges faced by foreign companies operating in India, especially Chinese companies. With a push for self-reliance and stricter enforcement of financial regulations, Indian authorities have been cracking down on alleged violations by foreign companies, including those related to tax evasion, money laundering, and foreign exchange rules.

The seizure of Xiaomi’s assets is seen as a warning to other foreign companies operating in India to ensure compliance with local laws and regulations. It also underscores the need for companies to have robust internal controls and risk management measures in place to mitigate potential legal and financial risks.

Since 2020, Chinese enterprises have found it difficult to do business in India due to political tensions following a border skirmish. India has banned over 300 Chinese apps, including popular ones like TikTok, citing security concerns. Many Chinese companies like WeChat and Alibaba have also faced scrutiny and restrictions in recent years due to concerns over data privacy, national security, and compliance with local laws.