Xiaomi accuses Enforcement Directorate of ‘physical violence’ threats during investigation: Report | technology news

New Delhi: Chinese smartphone maker Xiaomi Corp 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. according.

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 statement desired by the agency, Xiaomi’s May 4. stated in the filing.

After the Reuters story was published, the Enforcement Directorate issued a statement saying Xiaomi’s allegations were “untrue and baseless” and that company executives had quit “voluntarily in the most favorable environment”.

Xiaomi has been under investigation since February and last week the Indian agency seized $725 million 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 alleges intimidation by the enforcement agency when officers appeared for questioning several times in April.

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.

It added that the officers “were able to resist pressure for some time, (but) they eventually succumbed to such excessive and hostile abuse and pressure and inadvertently made certain statements.”

In its media statement, the Enforcement Directorate said that it is a “professional agency with strong work ethic and there was no coercion or threat to the company’s officials at any point of time”.

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 in 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% market share in India. It also sells 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.

Tax inspectors raided Xiaomi’s India offices in December. 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) sent foreign currency equivalent to 55.5 billion rupees ($725 million) to foreign entities, even though Xiaomi “did not take any service” 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 “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”.

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