Chinese smartphone maker Xiaomi Corp alleged its top executives faced threats of physical violence and coercion during questioning by the Enforcement Directorate (ED), according to a recent filing before the Karnataka High Court.
According to the filing dated May 4, officials from the ED warned the company’s former India managing director, Manu Kumar Jain, current Chief Financial Officer Sameer B.S. Rao, and their families of “dire consequences” if they did not submit statements as desired by the agency.
Enforcement Directorate responds:
The ED rejected as "baseless" the allegations that the statements of Xiaomi India officials were recorded "under coercion", saying the charges were an afterthought.
The federal agency issued a statement saying it was "a professional agency with strong work ethics and there was no coercion or threat to the officers of the company at any point of time".
"The allegations that the statement of the officials of Xiaomi India was taken under coercion by ED is untrue and baseless." "The officials of Xiaomi India deposed their statements before ED under FEMA voluntarily in the most conducive environment on various occasions," the agency said.
It said the statements were deposed by them on the basis of documents and information provided by the company during the course of investigation.
"Their statements corroborate with the written replies submitted to ED and the material on record," the agency said.
What is the case?
The ED seized Rs 5,551.27 crore of Xiaomi India, under the provisions of Foreign Exchange Management Act (FEMA). The amount was seized from four bank accounts of Xiaomi with HSBC, Citibank, IDBI and Deutsche Bank.
The ED had initiated an investigation in connection with the illegal remittances made by the company in February 2022 to companies based abroad, in the guise of royalties.
“The company remitted foreign currency equivalent to Rs 5,551.27 crore to three foreign-based entities which include one Xiaomi group entity in the guise of royalty. Such huge amounts in the name of royalties were remitted on the instructions of their Chinese parent group entities,” said ED in a statement.
“Xiaomi India has not provided any technological input or software-related assistance to these contract manufacturers. Interestingly, Xiaomi India has transferred money to the three foreign-based entities from which they have not availed any kind of service. The company remitted this amount in guise of royalty abroad which constitutes violation of the FEMA. The company also provided misleading information to the banks while remitting the money abroad,” ED statement added.
However, the Karnataka High Court earlier this week gave a breather to Xiaomi by staying the April 29 order of the ED by which Rs 5551.27 crore of the company was seized under the provisions of the Foreign Exchange Management Act,1999.
The vacation bench of Justice Hemant Chandangoudar stayed the ED order on Thursday, while also issuing notices to the respondents including the Ministry of Finance and various officers of the ED.
(With PTI inputs)
