India seeks to restore blockage of $725m of Xiaomi bank assets By Reuters

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© Reuters. FILE PHOTO: A man uses his mobile phone in front of a screen displaying a Xiaomi logo during the Mi Note launch ceremony in Beijing, picture taken January 15, 2015. REUTERS/Jason Lee

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MUMBAI (Reuters) – India’s Financial Crimes Agency on Thursday asked a court to reinstate a $725 million freeze on the Indian bank accounts of Xiaomi (OTC:) Corp as it investigates the transfers of funds by the Chinese smartphone giant.

The enforcement branch had seized the money saying that Xiaomi had illegally transferred funds overseas to three entities, including one in the Xiaomi Group, describing them as “royalty” payments.

But the high court in the southern state of Karnataka suspended the ruling after Xiaomi challenged it, saying all royalty payments were legitimate.

The stay decision would continue for now, a judge in the same court said Thursday, adding that the agency would make a formal request later in the day to reinstate the freeze.

“The case requires a new hearing,” added the judge, Siddappa Sunil Dutt Yadav, who set the next hearing for May 23.

A Xiaomi spokesperson did not immediately respond to a request for comment.

Xiaomi’s lawyers told the court that the banks did not allow the company to make the necessary payments, even though the court allowed it to use the funds for purposes other than paying royalties.

On Thursday, the judge allowed Xiaomi to use a bank overdraft facility for such payments.

The agency’s decision comes after Xiaomi said in a court filing that its top executives were threatened with “physical violence” and coercion during interrogation by law enforcement officials, claims that the agency rejected as false.

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