Xiaomi has taken on India’s Financial Crimes Control Agency, the Enforcement Directorate, since it froze $670 million in the company’s banking assets.
Legal documents show that Indian investigators allege that the India unit of Chinese smartphone company Xiaomi Corp misled its banker Deutsche Bank AG for years by claiming it had an agreement to pay royalties when it did not have any.
Xiaomi has shut down India’s Financial Crimes Control Agency, its enforcement directorate, since it froze $670 million in the company’s bank assets, saying an investigation found the smartphone vendor made “illegal transfers” to US chip maker Qualcomm and others in “Star” proceeds.
Xiaomi denies wrongdoing and has taken to an Indian court, saying its payments were legitimate and that the asset freeze – later confirmed by an appeal authority – had “effectively halted” its operations in a key market. The court in October denied any damages, and the case will be heard on November 7.
Documents in Xiaomi’s October 3 court filing shed new light on the investigation’s findings, showing that federal agents found suspected irregularities in the way its Indian unit made transfers as royalties to Qualcomm for licensed technologies such as patents.
According to court documents, which included the enforcement agency’s findings, an executive at Deutsche Bank India confirmed to federal agents in April that Indian law required the drafting of a legal agreement between Xiaomi India and Qualcomm to make royalty payments, and the smartphone company disclosed to the bank the existence of such an agreement.
Deutsche told investigators that, according to the documents, Xiaomi India did not share the agreement with the bank for confidentiality reasons.
However, during the investigation, Xiaomi’s chief financial officer in India, Sameer Rao, and its managing director at the time, Manu Kumar Jainacknowledged that there was no agreement between Qualcomm and Xiaomi India, and the royalties were transferred based on directions from Group Executives in ChinaThe documents showed, the Indian agency reported.
In its assessment, the agency noted that Xiaomi “provided misleading information to the bank. They did not share the agreement with the bank they cited as the basis for payment.”
“This shows… their intent to convert money Outside India according to the whims and whims of the Chinese parent.
A Deutsche Bank spokesman declined to comment. According to court documents, one of Xiaomi’s four bank accounts frozen in India is in Deutsche.
Qualcomm, in a statement, said that under the “license with Qualcomm, Xiaomi India pays royalties on all devices sold in India”. Both did not answer questions about equity agreements.
Rao, Jain, and the Enforcement Directorate did not respond.
Xiaomi, India’s largest smartphone maker with a market share of 21%, said it continues to stand by its “position on the legality of royalty payments,” referring to Reuters’ October 2 statement.
In that statement, he said xiaomi india It was a subsidiary and one of the Xiaomi group companies that entered into a legal agreement with Qualcomm. The statement added that it was “legitimate” for the India unit to pay the US company.
The Indian authorities do not agree with this and say that Xiaomi India is only acting as a distributor for smart phones Manufactured by contract manufacturers. Since the Indian unit has no role in designing the phones, it has “nothing to do” with Qualcomm’s equity payments, as valued by the agency, according to court documents.
Several Chinese companies have struggled to do business in India due to political tensions following the border clash in 2020. India has cited security concerns in banning more than 300 companies. Chinese apps And tighten investment standards for Chinese companies.
In the Xiaomi investigation, the company alleged that Rao and Jin faced threats of “physical violence” during interrogation by the Indian agency, Reuters reported in May. The agency described the allegations as “incorrect and baseless”.
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