According to a court petition seen by Reuters, Xiaomi’s top executives were threatened with “physical assault” and coercion while being questioned by India’s financial crime combating agency.

According to Xiaomi’s filing dated May 4, officials from the Enforcement Directorate warned Manu Kumar Jain, the company’s former India managing director, and Sameer B.S. Rao, the company’s current Chief Financial Officer, of “dire consequences” if they did not submit statements as requested by the agency.

A request for comment from the Enforcement Directorate was not immediately returned.

Xiaomi has been under investigation since February, and an Indian agency confiscated $725 million from Xiaomi’s India bank accounts last week, alleging that the business made unlawful transactions abroad “under the pretence of royalty” payments. continue reading

Xiaomi has denied any wrongdoing and claims that its royalty payments are legal. A judge heard Xiaomi attorneys on Thursday and put the Indian agency’s order to freeze bank assets on hold. The next hearing will take place on May 12. continue reading

When officials came for interrogation many times in April, the corporation claims they were intimidated by India’s top law enforcement agency.

According to the filing in the High Court of southern Karnataka, Jain and Rao were “threatened… with dire consequences including arrest, damage to their career prospects, criminal liability, and physical violence if they did not give statements as per the dictates of” the agency on several occasions.

The executives “were able to resist the pressure for a period of time, but they eventually yielded under such intense and hostile abuse and pressure and involuntarily made some remarks,” according to the report.

[embedpost slug=”india-seizes-725m-from-chinas-xiaomi-over-illegal-remittances/”]

Xiaomi declined to respond due to ongoing legal matters. Reuters reached out to Jain and Rao but received no response.

Jain is now Xiaomi’s global vice president, located in Dubai, and is credited with the company’s rapid growth in India, where Xiaomi handsets are extremely popular.

According to Counterpoint Research, Xiaomi was the largest smartphone seller in India in 2021, with a 24 percent market share. It has 1,500 employees in the country and sells various electronic devices such as smart watches and televisions.

Due to political concerns following a border skirmish in 2020, several Chinese enterprises have struggled to do business in India. Since then, India has banned over 300 Chinese apps due to security concerns, as well as tightened the rules for Chinese enterprises investing in India.

In December, tax officials searched Xiaomi’s India operations. According to court documents, the Enforcement Directorate — which investigates matters such as foreign currency law infractions – began scrutinising Xiaomi’s royalty payments after obtaining information from tax authorities.

Xiaomi Technology India Private Limited (XTIPL) sent the foreign currency equivalent of 55.5 billion rupees ($725 million) to businesses outside India, according to the agency, despite Xiaomi “not availing any service” from them.

“Such large sums in the name of royalties were remitted on the directions of their Chinese parent group organisations,” according to the agency.

According to Xiaomi’s court declaration, Indian agency officials “dictated and compelled” Xiaomi India CFO Rao to insert a sentence as part of his April 26 statement “under tremendous pressure.”

“I accept the royalty payments were paid by XTIPL as per the orders of certain persons in the Xiaomi group,” the line stated.

The following day, on April 27, Rao withdrew the statement, claiming it was “not voluntary and submitted under duress,” according to the petition.

Two days later, the directorate issued an order freezing Xiaomi’s bank accounts.

Xiaomi previously stated that its royalty payments were made for “in-licensed technology and IPs used in our Indian edition products,” and that the payments were “all legit and truthful.”

Xiaomi is “aggrieved for being targeted because some of its affiliate organisations are based in China,” according to its court petition.