Xiaomi says it accused law enforcement of ‘physical violence’ threats during investigation

Chinese smartphone maker Xiaomi said its top executives faced threats of “physical abuse” and coercion during interrogation at India’s Financial Crimes Enforcement Agency, according to court documents seen by Reuters.

Law Enforcement Authority officials have warned the company’s former managing director in India, Manu Kumar Jain, current CFO Samir B.S. Rao, and their families of “terrible consequences” if they do not file an application as required by the agency, the statement said. Xiaomi dated May 4th. stated.

The Investigation Department did not immediately respond to a request for comment.

Xiaomi has been under investigation since February, and last week an Indian agency confiscated $725 million (roughly Rs. 5,570 crore) lying in the company’s bank accounts in India, saying it was making illegal money transfers abroad “under the guise of royalties.”

Xiaomi denies any wrongdoing, saying the royalty payments were legal. On Thursday, a judge heard Xiaomi’s lawyers and set aside the Indian agency’s decision to freeze banking assets. The next hearing is scheduled for May 12.

The company alleges intimidation by India’s top law enforcement agency when its executives repeatedly appeared for questioning in April.

Jaina and Rao were, on certain occasions, “threatened with … dire consequences, including arrest, damage to career prospects, criminal liability and physical abuse if they did not testify as directed” by the agency, according to a statement in the document. High Court of the southern state of Karnataka.

The leaders “were able to resist the pressure for some time, (but) they eventually succumbed to such extreme and hostile insult and pressure and unwittingly made some statements,” he added.

Xiaomi declined to comment, citing pending litigation. Jane and Rao did not respond to inquiries from Reuters.

Jane is now the Global Vice President of Xiaomi based in Dubai and is credited with Xiaomi’s growth in India, where its smartphones are hugely popular.

In 2021, Xiaomi was the top smartphone seller with a 24% market share in India, according to Counterpoint Research. It also deals with other tech gadgets, including smart watches and TVs, and has 1,500 employees in the country.

FIGHT FOR MONEY TRANSFERS

Many Chinese companies have struggled to do business in India due to political tensions since the 2020 border clash. Since then, India has cited security concerns by banning more than 300 Chinese apps and has also tightened regulations for Chinese companies investing in India.

In December, tax inspectors raided Xiaomi offices in India. After receiving information from the tax authorities, the Law Enforcement Agency, which investigates issues such as violations of currency laws, began to review Xiaomi’s royalty payments, court documents show.

Last week, the agency reported that Xiaomi Technology India Private Limited (XTIPL) transferred the equivalent of $725 million in foreign currency to overseas entities, although Xiaomi “did not use any services” from them.

“Such huge amounts as royalties were transferred at the direction of their Chinese parent companies,” the agency said in a statement.

Xiaomi’s lawsuit alleges that during the investigation, Indian agency officials “dictated and coerced” Xiaomi India CFO Rao to include the verdict in his statement “under extreme duress” on April 26.

The line read: “I acknowledge that royalty payments have been made by XTIPL in accordance with the instructions of certain persons in the Xiaomi group.”

A day later, on April 27, Rao withdrew the statement, stating that it was “involuntarily and made under duress,” according to the documents.

Two days later, the directorate issued an order to freeze assets in Xiaomi bank accounts.

Xiaomi said in a previous media statement that it considers its royalties to be “all legal and truthful” and payments were made for “licensed technology and IP addresses used in our products for the Indian version.”

Its lawsuit states that Xiaomi is “saddened to be targeted as some of its affiliates are based outside of China.”

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