Home » India says Xiaomi misled Deutsche Bank on ‘illegal’ royalty payments

India says Xiaomi misled Deutsche Bank on ‘illegal’ royalty payments

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  • Xiaomi, Indian distributors face off over royalty payments
  • India has frozen Xiaomi’s $670 million bank assets
  • Xiaomi says freeze in India has ‘virtually halted’ operations

NEW DELHI (Reuters) – Indian investigators have accused Chinese smartphone maker Xiaomi (1810.HK) Indian unit defrauded bankers Deutsche Bank AG (DBKGn.DE) For years, it claimed to have agreed to pay royalties when it did not, according to legal documents.

Xiaomi has since teamed up with India’s financial crime-fighting agency, the Enforcement Bureau. Freeze the company’s $670 million Investigation found smartphone seller made “illegal money transfers” to US chip company Qualcomm, according to bank assets (QCOM.O) Others in the “guise” of royalty.

Xiaomi denied any wrongdoing, argued that the company’s payments were legitimate and that the asset freeze “effectively halted” its operations in a key market, and approached an Indian court.The court ruled in October. has refused any relief and the next hearing will take place on November 7th.

Documents contained in Xiaomi’s Oct. 3 court filing shed new light on the investigation’s findings, alleging fraud in how its Indian unit sent money to Qualcomm for the use of its patents and other licensed technology. Federal investigators have discovered that

Deutsche Bank executives in India told federal investigators in April that Indian law had allowed them to make royalty payments between Xiaomi India and Qualcomm, according to court documents containing law enforcement findings. A legal agreement had to be drawn up, and the smartphone company disclosed to the bank that such an agreement existed.

Deutsche told investigators that Xiaomi India did not share the contract with the bank for confidentiality reasons, according to the documents.

However, during the investigation, Xiaomi’s India CFO Sameer BS Rao and then managing director Manu Kumar Jain admitted that there was no agreement between Qualcomm and Xiaomi India and that the royalties were received from the group’s executives. The remittance was made according to instructions.In China, the Indian agency said, documents showed.

Xiaomi “provided banks with misleading information. They did not share the agreements with the banks they referred to as the basis for the payments,” the agency said in its assessment.

“This shows their intention to send money out of India according to the whims and fantasies of their Chinese parents,” he added.

A spokeswoman for Deutsche Bank declined to comment. According to court documents, one of Xiaomi’s four frozen bank accounts in India is in Deutsche.

Qualcomm said in a statement that “under a license with Qualcomm, Xiaomi India will pay royalties for all devices sold in India.” Neither of them responded to questions about royalty agreements.

Rao, Jain, and the Bureau of Enforcement did not respond.

Xiaomi, India’s largest smartphone player with a 21% market share, said it continued to support its “position on the legality of royalty payments,” Reuters citing a statement on Oct. 2. .

In its statement, it said that Xiaomi India is an affiliate and one of the Xiaomi Group that has signed a legal agreement with Qualcomm. It was “legal” for the Indian sector to pay the US company, the statement added.

Indian authorities have disagreed with this, saying that Xiaomi India only acts as a reseller of smartphones made by contract manufacturers. Court documents show that the Indian division had no involvement in the design of the mobile phones and therefore had “nothing to do” with the royalty payments to Qualcomm, the agency assessed.

Many Chinese companies are struggling to do business in India due to political tensions after the 2020 border dispute. India has raised security concerns by banning more than 300 Chinese apps and tightening investment standards for Chinese companies.

In an investigation into Xiaomi, the company claimed that Rao and Jae-in faced threats of “physical violence” during interrogation by Indian agencies, according to Reuters. I called it a thing.

Reporting by Aditya Kalra and Munsif Vengattil of New Delhi. Additional reporting by Nimitt Dixit. Edited by Muralikumar Anantharaman

Our criteria: Thomson Reuters Trust Principles.

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