'Untrue': ED dismisses Xiaomi's allegations of threat during probe

The Enforcement Directorate (ED) officials “threatened” Chinese smartphone maker Xiaomi Corporation’s top executives during questioning in connection with a probe, the company has alleged in a filing in the Karnataka High Court, a report said on Saturday (May 7).

The allegations of the company were dismissed by the ED calling them “baseless and far from the facts”.

Also read: ED issues FEMA summons to Xiaomi global VP Manu Kumar Jain

Officials from the ED warned the Xiaomi India’s former 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, Xiaomi’s filing dated May 4 stated, a Reuters report said.

The company alleged intimidation by the ED when executives appeared for questioning multiple times in April.

Jain and Rao were on certain occasions “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 court filing.

The executives “were able to resist the pressure for some time, (but) they ultimately relented under such extreme and hostile abuse and pressure and involuntarily made some statements,” it added.

The ED was questioning the Xiaomi officials over alleged illegal remittances made by the company in February.

ED reacts

In a statement on Saturday, the ED termed Xiaomi’s allegations as “untrue and baseless”.

“The allegations that the statement of the officials of Xiaomi India was taken under coercion by ED is untrue and baseless. The officials of the Xiaomi India deposed their statements before ED under FEMA 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 investigation. Their statements corroborate with the written replies submitted to ED and the materials on record,” the agency said.

“Statements of Manu Kumar Jain were recorded on 13.04.2022, 14.04.2022, 21.04.2022 and 26.04.2022 and statements of Sameer B S Rao were recorded on 25.03.2022, 14.04.2022, 19.04.2022, 21.04.2022, 22.04.2022 and 26.04.2022. However, no complaint was filed by them at any point of time during recording of statements at various occasions. Last statement of the officials of the company was recorded on 26.04.2022 and the seizure order was passed on 29.04.2022. It appears that allegation now made after passage of substantial time is an afterthought. The allegations are baseless and far from the facts.

“It is reiterated that ED is 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. As Ukraine war deepens great-power divisions, a revitalized non-aligned movement could emerge,” it added.

ED seizes Xiaomi’s ₹5,551 crore

On April 29, the ED, in a press release, said that it has seized ₹5551.27 crore of M/s Xiaomi Technology India Private Limited under the provisions of the Foreign Exchange Management Act, 1999.

“Xiaomi India is a wholly owned subsidiary of China-based Xiaomi group. This amount of ₹5551.27 Crore lying in the bank accounts of the company has been seized by the ED. ED had initiated investigation in connection with the illegal remittances made by the company in the month of February this year,” the ED said.

“The Company started its operations in India in the year 2014 and started remitting the money from the year 2015. The Company has remitted foreign currency equivalent to INR 5551.27 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. The amount remitted to other two US-based unrelated entities were also for the ultimate benefit of the Xiaomi group entities,” it added.

According to the ED, Xiaomi India is a trader and distributor of mobile phones in India under the brand name of MI. It procures the completely manufactured mobile sets and other products from the manufacturers in India.

“The Xiaomi India has not availed any service from the three foreign based entities to whom such amounts have been transferred. Under the cover of various unrelated documentary façade created amongst the group entities, the company remitted this amount in guise of Royalty abroad which constitute violation of Section 4 of the FEMA. The Company also provided misleading information to the banks while remitting the money abroad,” the ED said.

The Karnataka High Court on Thursday (May 5) stayed the order issued by the ED. The court also issued notices to the respondents including the Ministry of Finance and various officers of the ED. The next hearing is on May 12.