Tuesday, 14 May, 2024

Indian agency accused of ‘physical violence’ threats during Xiaomi probe

Smartphone manufacturing giant Xiaomi Corp has accused India’s Enforcement Directorate of hostile abuse as the agency probes the company’s royalty payments.

Xiaomi was the leading smartphone seller in 2021 with a 24 percent market share in India.
Xiaomi was the leading smartphone seller in 2021 with a 24 percent market share in India. (AP)

Chinese smartphone maker XiaomiCorp has alleged its top executives faced threats of"physical violence" and coercion during questioning by India'sfinancial crime fighting agency.

Officials from the Enforcement Directorate warned thecompany's former India managing director, Manu Kumar Jain,current Chief Financial Officer Sameer B.S. Rao, and theirfamilies of "dire consequences" if they did not submitstatements as desired by the agency, according to Xiaomi's court filing dated May 4 seen by Reuters.

The Enforcement Directorate did not immediately respond to arequest for comment. Xiaomi has been under investigation since February and lastweek the Indian agency seized $725 million lying in thecompany's India bank accounts, saying it made illegalremittances abroad "in the guise of royalty" payments.

Xiaomi has denied any wrongdoing, saying its royaltypayments were legitimate. On Thursday, a judge heard Xiaomilawyers and put on hold the Indian agency's decision to freezebank assets. The next hearing is set for May 12.

Jain is now Xiaomi's global vice president based out ofDubai and is credited for Xiaomi's rise in India, where itssmartphones are hugely popular.

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

READ MORE:India seizes $725M of Xiaomi assets in illegal remittance probe

Fight over remittances

Many Chinese companies have struggled to do business inIndia due to political tensions following a border clash in2020. India has cited security concerns in banning more than 300Chinese apps since then and also tightened norms for Chinesecompanies investing in India.

Tax inspectors raided Xiaomi's India offices in December. Onreceiving information from tax authorities, the EnforcementDirectorate – which probes issues such as foreign exchange lawviolations – started reviewing Xiaomi's royalty payments, courtdocuments show.

The agency last week said Xiaomi Technology India PrivateLimited (XTIPL) remitted foreign currency equivalent of $725 million (55.5 billion rupees) to entities abroad even though Xiaomi had "not availed any service" from them.

"Such huge amounts in the name of royalties were remitted onthe instructions of their Chinese parent group entities," theagency said.

Xiaomi's court filing alleges that during the investigation,Indian agency officials "dictated and forced" Xiaomi India CFORao to include a sentence as part of his statement "underextreme duress" on April 26.

The line read: "I admit the royalty payments have been madeby XTIPL as per the directions from certain persons in theXiaomi group."

A day later, on April 27, Rao withdrew the statement sayingit was "not voluntary and made under coercion", the filingshows. The directorate issued an order to freeze assets in Xiaomi'sbank accounts two days later.

Xiaomi has said in a previous media statement it believesits royalty payments "are all legit and truthful" and thepayments were made for "in-licensed technologies and IPs used inour Indian version products."

READ MORE:Xiaomi topples Apple to become second largest smartphone brand in the world

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