Xiaomi accuses Indian agency of physical violence threats

Chinese smartphone maker Xiaomi Corp has alleged its top executives faced threats of physical violence and coercion during questioning by India’s financial crime fighting agency. Officials from the Enforcement Directorate warned the company’s former India managing director, Manu Kumar Jain, current Chief Financial Officer Sameer B.S. Rao, and their families if they did not submit statements as desired by the agency, Xiaomi’s filing dated May 4 stated.

The Enforcement Directorate issued a statement saying Xiaomi’s allegations were untrue and baseless and company executives had deposed voluntarily in the most conducive environment. Xiaomi has been under investigation since February. The Indian agency seized $725 million in the company’s India bank accounts, saying it made illegal remittances abroad in the guise of royalty payments. Xiaomi has denied any wrongdoing.

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 alleges intimidation by the enforcement agency when executives appeared for questioning multiple times. Jain and Rao were on certain occasions threatened with dire consequences including arrest, damage to the career prospects, criminal liability and physical violence. This is according to the filing in the High Court of southern Karnataka state. The executives were able to resist the pressure for some time. But they ultimately relented under such extreme and hostile abuse and pressure.

The Enforcement Directorate said it 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. Jain is now Xiaomi’s global vice president based in Dubai and is credited with Xiaomi’s rise in India. Xiaomi was the leading smartphone seller in 2021 with a 24% market share in India. It also sells other tech gadgets including smart watches and televisions, and has 1,500 employees in the country.

Many Chinese companies have struggled to do business in India due to political tensions. India has cited security concerns in banning more than 300 Chinese apps since then. Tax inspectors raided Xiaomi’s India offices in December. On receiving information from tax authorities, the Enforcement Directorate which probes issues such as foreign exchange law violations started reviewing Xiaomi’s royalty payments. Xiaomi Technology India Private Limited (XTIPL) remitted foreign currency equivalent to 55.5 billion rupees to entities abroad even though Xiaomi had not availed any service from them.

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”.