By Aditya Kalra

NEW DELHI, Reuters -India claimed Saturday that it took $725 Million from local accounts of China’s Xiaomi Corp (OTC:) Corp. This was after a probe revealed that the phone maker made illegal remittances abroad and passed them off as royalties.

Enforcement Directorate was investigating Chinese business practices in relation to suspected violation of Indian foreign currency laws.

After finding that the company had sent 55.5 billion rupees in foreign currency to three entities overseas, the financial crime-fighting agency claimed it had taken the assets of Xiaomi Technology India Private Limited’s bank accounts. One entity was part of the Xiaomi Group.

In a statement, the agency stated that the remittances to the two unidentified U.S. entities were also intended for the “ultimate benefit” of the Xiaomi-related entities.

The directorate stated that such large amounts were paid in royalties on instructions from their Chinese parent groups.

In a statement released later Saturday, Xiaomi stated that it adheres to Indian law and believes its royalties payments and statements made to the bank were all legitimate and true.

It stated that the royalty payments made by Xiaomi India were for in-licensed technology and IPs, which are used in Indian versions of our products. “We are committed to working closely to government officials to clear any misunderstandings,” it said.

This directorate’s action against Xiaomi signals a greater scrutiny of the Chinese smartphone manufacturer. In December, their India office was also raided as part of an investigation into alleged income tax evasion. Other Chinese smartphone manufacturers were also raided.

Reuters reported that Manu Kumar Jain (ex-head of Xiaomi India) was summoned to question him as part the investigation by the directorate.

According to a source who has direct knowledge of the investigation, Jain (who is now the global vice president of Xiaomi, based in Dubai) appeared before investigators this month. The source requested not to be identified due to the sensitive nature of the matter.

Enforcement Directorate requested information from the company about foreign funding, shareholdings, funding patterns and financial statements. It also sought details on key business executives.

Counterpoint Research found that Xiaomi, India’s top smartphone seller, had a 24% share of the market in 2021. South Korea’s Samsung (KS) was No. With a share of 19%, 2 brands were present.

Due to the political tensions that arose from a 2020 border dispute, many Chinese businesses have had difficulty doing business in India. India banned more than 300 Chinese apps, including TikTok and other popular apps, citing security concerns. It also increased restrictions for Chinese investors in India.