Munsif Vengattil & Aditya Karra

NEW DELHI (Reuters) – Chinese smartphone company Xiaomi (OTC) Corp is facing legal problems in India after a federal tax authority and a financial crime-fighting agency investigated its business practices.

Xiaomi has denied wrongdoing. However, it was recently made headlines by allegations that some of its employees were intimidated and beaten up by Indian officials.

Below are some details on the brawls that took place in one of Xiaomi’s most important markets.

WHAT IS THE ROYALTY CASES?

The Enforcement Directorate in India, which is a financial crime-fighting organization, has been investigating Xiaomi’s activities since February. The Enforcement Directorate, India’s financial crime-fighting agency, said that Xiaomi had transferred money abroad illegally to “royalties” payments, one of which was from a Xiaomi group company.

After a legal challenge from Xiaomi, the Indian court halted its seizure of $725 Million in local bank accounts belonging to Xiaomi.

According to the Chinese company, its royalties were legitimate for Indian IPs and technologies that were in-licensed.

According to Xiaomi’s court filings, such payments were made by the company to companies including Qualcomm (NASDAQ:) Inc. The disclosures to Indian authorities regarding these transactions are also made.

THE THREATS OF “PHYSICAL VIOLENCE”.

Xiaomi filed an Indian court case claiming that its executives were subject to threats and coercion from the Enforcement Directorate.

According to the Indian agent, Manu Jain, a former head of India and global vice-president for Xiaomi, was questioned multiple times by Indian agents. Sameer B.S. is currently Chief Financial Officer. Rao threatened them with “dire consequences” for not submitting statements to the agency’s satisfaction.

These accusations were revealed by Reuters. The federal agency responded, calling the claims “untrue” and “baseless” and stating that the executives were deposed “voluntarily and in the most favorable environment.”

China’s Foreign Ministry in Beijing also responded, asking New Delhi for investigations to determine if laws were being followed and to make sure that Chinese businesses are not discriminated against.

OTHER TAX PROBES AND CHINA SCRUTINY

Chinese companies are not allowed to do business in India after 2020 due to a clash at the border between India and China. India has banned more than 300 Chinese apps, which includes popular apps like TikTok. It also tightened regulations for Chinese investors in India.

The India offices of Xiaomi were searched in December as part of an investigation regarding alleged income tax fraud.

In January, India’s Revenue Intelligence Wing demanded that Xiaomi pay $84.5 Million for allegedly cheating import duties.

Xiaomi expressed concern in its most recent court filing against Enforcement Directorate. It stated that the agency’s actions “create an atmosphere of distrust” and that the image of China suffers internationally.

INDIA KEY MARKET FOR XIAOMI

Xiaomi has many options for Indian customers, as it sells various tech gadgets such smart watches, televisions, etc.

However, the company’s affordable smartphones are what is most well-known. This has allowed it to grow quickly in India. Analysts were told by the company that they had maintained “India’s #1 ranking for 17 consecutive quarters”.

Counterpoint Research has shown that its market share in India has quadrupled since 2016, when it was just 6%. It is now the market leader.

According to the court filing, 1,500 Indian employees work for the company and provide income for 52,000 third-party workers.