Xiaomi India accuses ED of “physical violence” threat during investigation of top executives

As per news source, the top executives of Xiaomi Corp have faced threats of “physical violence” and coercion during questioning by India’s financial crime fighting agency, alleged the company.

Company’s former India Managing Director, Manu Kumar Jain, current Chief Financial Officer Sameer B.S. Rao, and their families had been warned of “dire consequences” by the officials of Enforcement Directorate (ED) if they did not submit statements as desired by the agency, according to Xiaomi’s court filing dated May 4.

Since February, Xiaomi has been under investigation and last week, the Indian agency seized $725 million lying in the company’s India bank accounts, saying it made illegal remittances abroad “in the guise of royalty” payments.

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

The company alleged intimidation by India’s premier enforcement agency 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 filing in the Karnataka high court.

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.

In December, Xiaomi India’s offices were raided by tax inspectors. On receiving information from tax authorities, the ED – which probes issues such as foreign exchange law violations – started reviewing Xiaomi’s royalty payments, court documents show.

The agency last week said Xiaomi Technology India Private Limited (XTIPL) remitted foreign currency equivalent of RS 55.5 billion ($725 million) to entities abroad even though Xiaomi had “not availed 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.

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

The line read: “I admit the royalty payments have been made by XTIPL as per the directions from certain persons in the Xiaomi group.”

A day later, on April 27, Rao withdrew the statement saying it was “not voluntary and made under coercion”, the filing shows.

Two days later ED issued an order to freeze assets in Xiaomi’s bank accounts.

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 Indian version products.”

Its court filing stated Xiaomi is “aggrieved for being targeted since some of its affiliate entities are based out of China”.