Chinese smartphone maker Xiaomi has alleged that its top Indian executives have faced threats of “physical violence” and coercion during the interrogation process by India’s Enforcement Directorate as per Reuters.
Officials from the ED have warned the former managing director of Xiaomi India, Manu Kumar Jain, and Chief Financial Officer, Sameer B.S. Rao, and their families of “dire consequences” if they did not submit statements as desired by the agency, Xiaomi’s filing dated the 4th of May stated.
Enforcement Directorate calls charges baseless
The ED has termed these allegations as untrue and baseless. “The officials of Xiaomi India deposed their statements before ED under FEMA (Foreign Exchange Management Act) voluntarily in the most conducive environment on various occasions. The statements were deposed by them on the basis of documents/information provided by the company during the course of the investigation. Their statements corroborate with the written replies submitted to ED and the materials on record,” the agency public stated.
ED said that there was no official complaint filed by the authorities of Xiaomi at any point while statements were being officially recorded. They also added that there was no coercion or threat to the company’s officers at any stage.
Xiaomi has been under investigation since February, last week the Indian agency seized nearly $725 million from the company’s India bank accounts claiming that it made illegal remittances abroad in the name of “royalty payments.”
Xiaomi has denied any wrongdoing, it claims that the payments in question were legit. On Thursday, a judge heard Xiaomi’s lawyers and put on hold the ED’s decision to freeze its assets. The next hearing is set to be on the 12th of May.
The Chinese company has alleged intimidation by the ED on multiple occasions when the company’s top executives appeared for questioning in April.
Jain and Rao on certain occasions were threatened with “dire consequences including arrest, damage to the career prospects, criminal liability, and physical violence if they did not give statements as per the dictates of” the agency, according to the filing in the High Court of Karnataka.
The executives “were able to resist the pressure for some time, they ultimately relented under such extreme and hostile abuse and pressure and involuntarily made some statements,” it added. Xiaomi declined to comment citing pending legal proceedings. The top executives did not make any comments with respect to these accusations.
Jain is now Xiaomi’s global VP and is based out of Dubai, the company is the top smartphone seller in India with a massive 24% market share in 2021 as per Counterpoint Research. It employs 1,500 people in the country.
The issue over remittances:
Tax inspectors raided Xiaomi’s India offices in December, upon receiving information from tax authorities, the ED began to review Xiaomi’s royalty payments.
The agency earlier last week said that Xiaomi India remitted foreign currency to the tune of 55.5 billion INR to entities abroad without “availing any service” from them.
“Such huge amounts in the name of royalties were remitted on the instructions of their Chinese parent group entities,” the agency said. Xiaomi’s court filing alleges that the ED “dictated and forced” Xiaomi India CFO Rao to include a sentence as a part of his statement “under extreme duress” on the 26th of April.
The line in question is, “I admit the royalty payments have been made by XTIPL as per the directions from certain persons in the Xiaomi group.”
Just one day later, Rao withdrew this statement by claiming it was “not voluntary and made under coercion.” Xiaomi has said in a previous media statement it believes its royalty payments, “Are all legit and truthful” and the payments were made for “in-licensed technologies and IPs used in our India version products.”
Xiaomi believes that it is being targeted since it is based out of China.
The ED stated company execs did not file any complaints during the recording of statements, “The officials of Xiaomi India deposed their statements before ED under FEMA voluntarily in the most conducive environment on various occasions,” the ED mentioned.
Xiaomi’s write petition said CFO Rao wrote a letter on the 25th of April stating that “he was not being permitted to file a retraction” of the statement that he was coerced to make.
The Karnataka HC in its order dated May 5, barred Xiaomi India from making royalty or other payments to companies based outside of India. The court also stayed the ED’s seizure of the company’s assets worth 5.55 billion INR. The matter is set for further hearing on the 12th of May.
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