Renowned Chinese smartphone giant Xiaomi, which competes with the likes of Samsung Electronics and other Chinese brands in the thriving Indian market, has found itself in a legal battle that has brought its operations in India to a halt.

In a riveting development, India's financial crime agency is alleging that Xiaomi, along with Deutsche Bank, HSBC, and Citigroup, made illegal remittances amounting to a staggering $673.2 million to foreign entities, under the guise of royalty payments.

Xiaomi had previously maintained that all payments made were legitimate.

Xiaomi's frozen assets are spread across accounts at various banks including Deutsche, Citi and HSBC, according to Reuters, citing court documents. Deutsche Bank, HSBC, and Citigroup were roped in as well, allegedly for permitting foreign remittances labelled as royalty payments without conducting the necessary due diligence and obtaining proper documentation.

Despite its claims of the asset freeze being "severely disproportionate," Xiaomi's request to lift the freeze was denied by an Indian court in April.

As this captivating saga unfolds, the outcome of the legal battle will undoubtedly shape the future trajectory of the smartphone company and its standing in the Indian market.