Exclusive – Xiaomi accuses Indian agency of ‘physical violence’, threats during probe

By Aditya Kalra and Abhirup Roy

NEW DELHI (Reuters) – Chinese language smartphone maker Xiaomi Corp has alleged its prime executives confronted threats of “bodily violence” and coercion throughout questioning by India’s monetary crime preventing company, based on a court docket submitting seen by Reuters.

Officers from the Enforcement Directorate warned the corporate’s former India managing director, Manu Kumar Jain, present Chief Monetary Officer Sameer B.S. Rao, and their households of “dire penalties” if they didn’t submit statements as desired by the company, Xiaomi’s submitting dated Might 4 acknowledged.

The Enforcement Directorate didn’t instantly reply to a request for remark.

Xiaomi has been underneath investigation since February and final week the Indian company seized $725 million mendacity within the firm’s India financial institution accounts, saying it made unlawful remittances overseas “within the guise of royalty” funds.

Xiaomi has denied any wrongdoing, saying its royalty funds have been professional. On Thursday, a choose heard Xiaomi attorneys and placed on maintain the Indian company’s choice to freeze financial institution property. The subsequent listening to is about for Might 12.

The corporate alleges intimidation by India’s premier enforcement company when executives appeared for questioning a number of instances in April.

Jain and Rao have been on sure events “threatened … with dire penalties together with arrest, harm to the profession prospects, felony legal responsibility and bodily violence if they didn’t give statements as per the dictates of” the company, based on the submitting within the Excessive Courtroom of southern Karnataka state.

The executives “have been in a position to withstand the strain for a while, (however) they in the end relented underneath such excessive and hostile abuse and strain and involuntarily made some statements,” it added.

Xiaomi declined to remark citing pending authorized proceedings. Jain and Rao didn’t reply to Reuters queries.

Jain is now Xiaomi’s world vp based mostly out of Dubai and is credited for Xiaomi’s rise in India, the place its smartphones are vastly well-liked.

Xiaomi was the main smartphone vendor in 2021 with a 24% market share in India, based on Counterpoint Analysis. It additionally offers in different tech devices together with good watches and televisions, and has 1,500 staff within the nation.

FIGHT OVER REMITTANCES

Many Chinese language corporations have struggled to do enterprise in India on account of political tensions following a border conflict in 2020. India has cited safety issues in banning greater than 300 Chinese language apps since then and in addition tightened norms for Chinese language corporations investing in India.

Tax inspectors raided Xiaomi’s India places of work in December. On receiving data from tax authorities, the Enforcement Directorate – which probes points resembling international trade regulation violations – began reviewing Xiaomi’s royalty funds, court docket paperwork present.

The company final week stated Xiaomi Expertise India Non-public Restricted (XTIPL) remitted international foreign money equal of 55.5 billion rupees ($725 million) to entities overseas though Xiaomi had “not availed any service” from them.

“Such big quantities within the title of royalties have been remitted on the directions of their Chinese language guardian group entities,” the company stated.

Xiaomi’s court docket submitting alleges that throughout the investigation, Indian company officers “dictated and compelled” Xiaomi India CFO Rao to incorporate a sentence as a part of his assertion “underneath excessive duress” on April 26.

The road learn: “I admit the royalty funds have been made by XTIPL as per the instructions from sure individuals within the Xiaomi group.”

A day later, on April 27, Rao withdrew the assertion saying it was “not voluntary and made underneath coercion”, the submitting reveals.

The directorate issued an order to freeze property in Xiaomi’s financial institution accounts two days later.

Xiaomi has stated in a earlier media assertion it believes its royalty funds “are all legit and truthful” and the funds have been made for “in-licensed applied sciences and IPs utilized in our Indian model merchandise.”

Its court docket submitting acknowledged Xiaomi is “aggrieved for being focused since a few of its affiliate entities are based mostly out of China”.

(Reporting by Aditya Kalra in New Delhi and Abhirup Roy in Mumbai; Modifying by Stephen Coates)