ED had launched an investigation into Xiaomi’s illegal transfers.
New Delhi:
Chinese smartphone maker Xiaomi Corp has alleged that its top executives were threatened with “physical violence” and coercion during questioning by the Indian financial crime agency, according to a court file accessed by Reuters.
Officials of the enforcement directorate warned former India director Manu Kumar Jain, current Chief Financial Officer Sameer BS Rao, and their families of “serious consequences” if they fail to make statements as desired by the agency, Xiaomi’s filing on 4 May stated.
The Enforcement Directorate did not immediately respond to a request for comment.
Xiaomi has been under investigation since February and last week the Indian agency seized $725 million in the company’s Indian bank accounts and said it had been making illegal money transfers abroad “under the guise of royalty payments”.
Xiaomi denies any wrongdoing and says the royalty payments were legitimate. On Thursday, a judge heard Xiaomi lawyers and upheld the Indian agency’s decision to freeze bank assets. The next hearing is scheduled for May 12.
The company alleges harassment by India’s top law enforcement agency when executives appeared for questioning multiple times in April.
Jain and Rao were “threatened on certain occasions…with serious consequences, including arrest, damage to career prospects, criminal liability and physical assault if they failed to make statements as per the regulations of” the agency, according to the Supreme Court filing of the agency. southern state of Karnataka.
The executives “were able to withstand the pressure for some time, (but) they eventually gave in under such extreme and hostile abuse and pressure and made some statements involuntarily,” it added.
Xiaomi declined to comment citing legal proceedings. Jain and Rao did not respond to questions from Reuters.
Mr. Jain is now the global vice president of Xiaomi from Dubai and is credited with the rise of Xiaomi in India where its smartphones are hugely popular.
Xiaomi was the largest smartphone seller in 2021 with a 24% market share in India, according to Counterpoint Research. It also trades in other tech gadgets, including smart watches and televisions, and has 1,500 employees in the country.
BATTLE OVER TRANSFERS
Many Chinese companies are struggling to do business in India due to political tensions following a border dispute in 2020. India has raised security concerns by banning more than 300 Chinese apps since then, and has also tightened standards for Chinese companies operating in India. to invest.
Tax inspectors raided Xiaomi’s offices in India in December. After receiving information from the tax authorities, the Enforcement Directorate — which investigates issues such as currency violations — began reviewing Xiaomi’s royalty payments, court documents show.
The agency said last week that Xiaomi Technology India Private Limited (XTIPL) transferred the foreign currency equivalent of 55.5 billion rupees ($725 million) to entities abroad, even though Xiaomi had “not taken advantage of” them.
“Such huge amounts in the name of royalties were transferred on behalf of their Chinese parent group entities,” the agency said.
Xiaomi’s lawsuit alleges that during the investigation, officials of the Indian agency “dictated and coerced” Xiaomi India CFO Rao to include a sentence as part of his statement “under extreme coercion” on April 26.
The line read: “I admit that the royalty payments were made by XTIPL according to the directions of certain individuals in the Xiaomi group.”
A day later, on April 27, Rao withdrew the statement, saying it was “not done voluntarily and under duress,” the statement said.
The directorate issued an order two days later to freeze funds in Xiaomi’s bank accounts.
Xiaomi has said in a previous media statement that it believes its royalty payments are “all legitimate and truthful” and that the payments are made for “licensed technologies and IPs used in our Indian version products”.
According to the court, Xiaomi is “sad to be targeted as some of its affiliated entities are located outside of China”.
