Reebok India, owned by Germany's Adidas (ADSGn.DE), lodged a police complaint against two former top executives accusing them of fraud that had led the company to lose 8.7 billion rupees.
The alleged fraud would be the most high-profile corporate scandal in India since 2009 when Satyam Computer's former chairman and founder Ramalinga Raju revealed that the company had overstated profits and falsified assets for years.
Reebok India is accusing former India Managing Director Subhinder Singh Prem and former Chief Operating Officer Vishnu Bhagat of financial wrongdoing, said police officials in Gurgaon, where the complaint was filed.
"Our criminal complaint has been registered for investigation by the Indian law enforcement authorities," Adidas said on Wednesday, without giving further details.
Prem did not respond to calls by Reuters, while Bhagat could not be immediately reached.
Adidas said in March that the two men had left the company.
"We have started our investigation and will now be checking the records of the company and carrying out an audit," an officer with the economic unit of the Gurgaon police told Reuters by phone on condition of anonymity.
Earlier this month, Adidas, the world's second-largest sporting goods company, said it will cut the number of Reebok stores in India by one-third as it was tackling "financial irregularities" at Reebok's Indian operations.
Prem filed a suit against Adidas after the German company's announcement and claimed damages of 150 million rupees, according to the Economic Times. The newspaper said Prem denied any involvement in financial irregularities.
Reuters could not immediately obtain a copy of the complaint filed by Reebok India on Monday.
According to local media reports, the company alleged that the two former officials stole products, set up secret warehouses, fudged accounts and engaged in fictitious sales for several years.
The reports also said Reebok alleged that the two officials ran an unauthorised franchise referral programme and money was collected on the pretext of opening new stores against instructions from Adidas.
Adidas bought U.S. rival Reebok in August 2005 for $3.8 billion but their Indian operations were merged only in 2011.
(Reporting by Nandita Bose, Additional reporting by Kaustubh Kulkarni in Mumbai; Editing by Tony Munroe and Ryan Woo)