xiaomi india: Xiaomi accuses ED of threats of “physical violence” during the forex investigation, the agency calls unfounded accusations

Chinese smartphone manufacturer Xiaomi Corp said its senior executives faced threats of “physical violence” and coercion while questioning India’s financial crime agency, according to a court filing seen by Reuters.

Application management officials warned the company’s former chief executive in India, Manu Kumar Jainthe current Chief Financial Officer Sameer BS Rao, and their families would have “dire consequences” if they did not submit statements as the agency hoped, Xiaomi’s May 4 filing said.

The enforcement management called the allegations false and unfounded. “The officials of the Xiaomi India filed their statements first AND under FEMA voluntarily in the most conductive environment on various occasions. The statements were filed by them on the basis of documents / information provided by the company during the investigation. Their statements confirm the written responses submitted to ED and the materials recorded, “the agency said in a statement.

ED stated that no complaints were filed by Xiaomi officials at any time during the recording of the statements on various occasions, adding that there was no coercion or threat to the company officials at any time.

Xiaomi has been under investigation since February and last week the Indian agency seized $ 725 million that lay in the company’s Indian bank accounts, claiming it made illegal overseas remittances “in the form of royalties”.

Xiaomi denied any wrongdoing, stating that its royalty payments were legitimate. On Thursday, a judge heard Xiaomi’s lawyers and suspended the Indian agency’s decision to freeze bank assets. The next hearing is set for 12 May.

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The company claims intimidation by India’s main law enforcement agency when executives appeared multiple times for questioning in April.

Jain and Rao have on certain occasions been “threatened … with dire consequences including arrest, damage to career prospects, criminal liability and physical violence if they did not make statements in accordance with the dictates” of the agency, according to the High Court filing. of the state of southern Karnataka.

The executives “have been able to withstand the pressure for some time, (but) have eventually succumbed to such extreme and hostile abuse and pressure and unwittingly made some statements,” he added.

Xiaomi declined to comment citing pending legal proceedings. Jain and Rao did not answer Reuters questions.

Jain is now Xiaomi’s global vice president based in Dubai and is credited with Xiaomi’s rise in India, where his smartphones are hugely popular.

Xiaomi was the leading smartphone seller in 2021 with a 24% market share in India, according to Counterpoint Research. It also deals with other tech gadgets, including smart watches and televisions, and has 1,500 employees in the country.

FIGHT ON THE RIMITTANTS

Many Chinese companies have struggled to do business in India due to political tensions following a border clash in 2020. India has cited security concerns in banning more than 300 Chinese apps since then and has also tightened regulations for Chinese companies investing in India.

Tax inspectors raided Xiaomi’s offices in India in December. After receiving information from tax authorities, the Enforcement Directorate – which investigates issues such as foreign exchange law violations – has begun reviewing Xiaomi’s royalty payments, court documents show.

The agency last week said that Xiaomi Technology India Private Limited (XTIPL) has remitted the foreign currency equivalent of 55.5 billion rupees ($ 725 million) to entities overseas even though Xiaomi “has not availed of any service “from them.

“How many huge amounts in the name of royalties have been remitted on instructions from their Chinese parent group entities,” the agency said.

Xiaomi’s court filing claims that during the investigation, Indian agency officials “dictated and forced” Rao, CFO of Xiaomi India, to include a ruling as part of his statement “under extreme duress” on April 26.

The line read: “I admit that the royalty payments were made by XTIPL according to the indications of some people of the Xiaomi group.”

The next day, April 27, Rao withdrew the statement saying it was “not voluntary and made under duress,” the filing shows.

Management issued an order to freeze assets in Xiaomi’s bank accounts two days later.

Xiaomi said in a previous media statement that it believes its payments “are all legitimate and truthful” and that the payments were made for “licensed technologies and IPs used in our Indian version products.”

Its court statement stated that Xiaomi is “saddened to have been targeted as some of its affiliated entities are based outside of China.”

It is not allowed to check out files: CFO Rao

The detective agency rejected the claim that it extracted statements through such intimidation.

“It seems that the accusation now made after a considerable time has elapsed is an afterthought,” he said. “The accusations are unfounded and far from the facts”. There has been no coercion or threat against the company’s executives at any time, the ED said.

The agency said company executives did not file any complaints while filing the statements, the latest of which was released on April 26. The statements by Manu Kumar Jain, former CEO of Xiaomi India, were recorded in three days, including April 26. Jain is currently Xiaomi’s global vice president.

“Xiaomi India officials have filed their statements before ED under Fema voluntarily in the most favorable environment on various occasions,” the statement by ED reads.

However, Xiaomi’s written petition stated that CFO Rao had written a letter on April 25 stating that he was “not allowed to file a retraction” of the coerced commitment.

In an interim order passed on May 5, the Karnataka High Court prohibited Xiaomi India from making royalties or other payments to companies outside India. The court also suspended ED’s seizure of the company’s assets worth more than ₹ 5,551.27 crore. He sent the matter for a further hearing on May 12.