Xiaomi alleges coercion by Enforcement Directorate; China seeks fair treatment
What's the story
The Xiaomi India v/s Enforcement Directorate (ED) saga has seemingly entered a crucial phase, with the tech giant alleging threats of physical violence and intimidation by the Indian agency. According to a court filing accessed by Reuters, officials from the agency warned two company executives of "dire consequences" to themselves and their families if they did not cooperate with the agency.
Context
Why does this story matter?
Xiaomi has been under investigation for violation of laws related to foreign remittances since February. ED has accused the company of making illegal transactions with foreign companies under the pretext of royalty payments. Xiaomi has opposed these allegations. The new turn of events has the potential of derailing the investigation and becoming a diplomatic issue rather than a legal one.
Allegations
ED threatened executives with dire consequences: Xiaomi
In a court filing dated May 4, Xiaomi has accused the ED of threatening its executives Manu Kumar Jain and Sameer Rao during the investigation. The company says that Rao and Jain were threatened with "dire consequences including...criminal liability and physical violence" if they didn't make statements as desired by the agency. As per the filing, the officials "ultimately relented under such extreme pressure."
Information
Xiaomi says ED forced CFO to make statement against company
In its court filing, Xiaomi alleges that the ED forced Rao, the Chief Financial Officer of the company, to admit to wrongdoing in the foreign remittances issue. According to the company, he was "under extreme duress."
Response
Enforcement Directorate denies the allegations
In response to the allegations raised by Xiaomi, ED has come out saying that they are "untrue and baseless." The agency said that the company executives made statements "voluntarily in the most conducive environment." The directorate has accused Xiaomi of making foreign remittances in violation of the FEMA, 1999. On April 29, it seized Rs. 5,551.27 crore worth of assets of the company.
Information
Karnataka HC stayed the seizure of assets
In Xiaomi's plea questioning the legality of ED's action, the Karnataka High Court had stayed the seizure of assets. It also allowed the company to carry out day-to-day functions. The next hearing will take place on May 12.
Chinese reaction
China wants India to treat its companies fairly
Hailing from China, Xiaomi's rise in the last few years has been astronomical. Unsurprisingly, the Chinese government has made its mind clear on the issue. Zhao Lijian, a foreign ministry spokesperson said, "China hopes India will provide a fair, just, non-discriminatory business environment to Chinese companies with investments and operations in India, and carry out investigations in compliance with the law."