Chinese smartphone maker Xiaomi has alleged that its top executives faced threats of “physical violence” and coercion during interrogation by India’s financial crime-fighting agency, according to a court filing seen by Reuters.
Enforcement Directorate officials warned the company’s former India managing director, Manu Kumar Jain, current chief financial officer Sameer BS Rao and their families of “serious consequences” if they did not submit the statements desired by the agency. Xiaomi’s The May 4 filing 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 confiscated $725 million (about Rs 5,570 crore) lying in the company’s India bank accounts, saying it made illegal remittances abroad “under the guise of royalties”. .
Xiaomi denies any wrongdoing, saying its royalty payments were legitimate. On Thursday, a judge heard Xiaomi’s lawyers and stayed the Indian agency’s decision to freeze the bank’s assets. The next hearing has been fixed for May 12.
The company alleged that when the officers appeared for questioning several times in April, they were intimidated by India’s premier enforcement agency.
Jain and Rao were on a few occasions “intimidated … with dire consequences including arrest, loss of career prospects, criminal liability and physical violence” for not making statements in accordance with the agency’s directions, as per the filing. Was. High Court of Southern Karnataka State.
The officers “were able to resist the pressure for some time, (but) they eventually relented under such excessive and hostile abuse and pressure and inadvertently made few statements.”
Xiaomi declined to comment, citing pending legal proceedings. Jain and Rao did not respond to questions from Reuters.
Jain is now the Global Vice President of Xiaomi based out of Dubai and is credited with the rise of Xiaomi in India, where its smartphones are extremely popular.
According to Counterpoint Research, Xiaomi was the leading smartphone vendor in 2021 with 24 percent market share in India. It also deals in smart watches and other tech gadgets including televisions, and has 1,500 employees in the country.
fight over dispatch
Many Chinese companies have struggled to do business in India due to political tensions after border clashes in 2020. India has since banned more than 300 Chinese apps citing security concerns and stringent norms for Chinese companies investing in India.
In December, tax inspectors raided Xiaomi’s India offices. Upon receiving information from tax authorities, the Enforcement Directorate – which investigates issues such as foreign exchange law violations – began to review Xiaomi’s royalty payments, court documents show.
The agency said last week that Xiaomi Technology India Private Limited (XTIPL) remitted foreign exchange equivalent to $725 million (about Rs 5,570 crore) to entities abroad even though Xiaomi “did not avail any services” from them. .
“Such a huge amount in the name of royalty was sent on the instructions of their Chinese parent group entities,” the agency said.
Xiaomi’s court alleged that during the investigation, officials of the Indian agency “directed and coerced” Xiaomi India CFO Rao to include a sentence as part of his statement “under extreme pressure” on April 26.
The line read: “I acknowledge that royalty has been paid by XTIPL in accordance with the instructions of certain individuals of the Xiaomi Group.”
A day later, on April 27, Rao retracted the statement, saying it was “not voluntary and was made under coercion”, the filing shows.
The directorate issued an order freezing the assets in Xiaomi’s bank accounts two days later.
Xiaomi has said in a previous media statement that it believes its royalty payments are “all valid and true” and that the payments were made “for the licensed technologies and IP used in our Indian variant products”. .
Its court filing states that Xiaomi is “distressed to be targeted because some of its affiliated entities are based out of China”.
© Thomson Reuters 2022