China has been rattled since India started investigating Xiaomi’s financial fraud. Xiaomi, a Chinese electronics company, is a leading player in the Indian mobile market.
The Enforcement Directorate (ED) investigation revealed that Xiaomi had sent money to two US-based companies and one China-based company illegally.
After the financial fraud was detected, the ED, by an order on April 29, seized Rs 5551.27 crore of the company under the provisions of the Foreign Exchange Management Act (FEMA), 1999.
High-ranking officials of Xiaomi India were interrogated by the ED.
Later, Xiaomi India submitted in the Karnataka High Court that its top executives, including Xiaomi global vice-president Manu Kumar Jain and chief financial officer Sameer BS Rao, were threatened with “physical violence and coercion” during their questioning by the ED in Bengaluru.
Strongly refuting the submission of Xiaomi India, it said in a statement that the Enforcement Directorate is “a professional agency with strong work ethics and there was no coercion or threat to the officers of the company at any point of time…The allegations that the statement of the officials of Xiaomi India was taken under coercion by ED is untrue and baseless.”
In a statement issued on Monday (May 9), the Chinese External Affairs Ministry said, “China is closely following reports on threats of physical violence & coercion faced by Chinese business executive in India. The Chinese government asks Chinese companies to abide by laws & regulations overseas and also supports them in protecting their lawful rights & interests.”
“We hope the Indian side can provide a fair, just & non-discriminatory business environment for Chinese companies investing & operating in India, and conduct investigation & law enforcement in accordance with laws & regulations to increase global investors’ confidence,” it added.
In its investigation, the ED had found that Xiaomi India had violated Section 4 of the FEMA Act by transferring money in the name of ‘Technology Royalty’ to three companies outside India, two in the United States and one in China. The investigating agency had also found that Xiaomi India had not taken any service from the three concerned companies.
On May 7, the Karnataka High Court provided relief to Xiaomi India by unfreezing its accounts and allowing it to use accounts to run day to day operations.