Chinese Mobile Maker Reportedly Accuses Indian Agency of Threatening Its Employees With 'Violence'

Chinese smartphone maker Xiaomi has accused India’s Enforcement Directorate (ED) of threatening its employees with “physical violence” during an ongoing investigation by Indian investigators into the company’s remittances, Reuters reported on Saturday.

According to remarks made by Xiaomi Corp in court on 4 May, the company’s former Managing Director of India, Manu Jain, as well as Chief Financial Officer B. S. Rao were threatened with “dire consequences” if they didn’t make the statement desired by the Indian investigative agency.

Jain is currently the vice-president of Xiaomi’s global operations and is based in Dubai.

The statement, made in the Karnataka High Court in the southern metropolis of Bengaluru, claims that Jai and Rao were not only “threatened” with violence, but also with “criminal liability” and “damage to their career prospects” if they didn’t comply with ED’s terms.

The court filing claims that the executives “relented” under pressure and “involuntarily” made some statements.

"I admit the royalty payments have been made by XTIPL (Xiaomi Technology India Private Limited) as per the directions from certain persons in the Xiaomi group," Rao reportedly told ED during an interrogation last month, a statement he later withdrew.

The Enforcement Directorate has claimed that Xiaomi Technology India Private Limited has “remitted foreign currency” to the tune of $725 million to three foreign-based entities since it began operations in India in 2014.

The agency claims that the remittances were in violation of the Foreign Exchange Management Act (FEMA), the federal anti-money laundering legislation.

The agency initiated a probe against Xiaomi in February this year.

“Such huge amounts in the name of royalties were remitted on the instructions of their Chinese parent group entities. The amount remitted to two other unrelated US-based entities was also for the ultimate benefit of the Xiaomi group entities,” the ED said in a statement on 30 April.

The ED also informed in the press release that the $725 million (approximately) in Xiaomi’s bank accounts in India has been “seized” by the ED.

Xiaomi has denied any wrongdoing and claimed that its operations in India are fully compliant with Indian law.

During the court hearing into the matter, a judge this week put on hold ED’s order to freeze Xiaomi’s bank accounts. The next hearing into the case is scheduled for 12 May.