During a probe, Xiaomi was slammed to the Enforcement Directorate for 'physical violence' threats

During a probe, Xiaomi was slammed to the Enforcement Directorate for 'physical violence' threats ...

According to a court filing, Chinese smartphone manufacturer Xiaomi accused of having faced "physical violence" and coercion if questioned by India''s financial crime fighting agency.

Officials from the Enforcement Directorate advised the company''s former India managing director, Manu Kumar Jain, and its current Chief Financial Officer, Saul Rao, of "dire consequences" if they did not submit statements as requested by the agency, according to the company''s filing on May 4.

The Enforcement Directorate did not respond to a request for clarification immediately.

Xiaomi has been under investigation since February, and last week the Indian agency confiscated $725 million (approximate Rs. 5,570 crore) in its India bank accounts, declaring that it made unlawful remittances abroad "under the auspices of royalty payments.

Xiaomi has denied any wrongdoing, claiming that its royalty payments were justified. On Thursday, a judge heard Xiaomi''s lawyers and imposed the suspension of the Indian bank''s bank assets. The next hearing will begin on May 12.

When executives appeared for questioning multiple times in April, the company claims to be intimidated by India''s top enforcement agency.

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According to a filing in the High Court of southern Karnataka state, Jain and Rao were "threatened"... with devastating consequences, including arrest, damage to their career prospects, criminal liability, and physical violence.

"They were able to stand up to pressure for a while, but) they ultimately relented under such extreme and hostile pressure and made several statements," said one executive.

Xiaomi has declined to comment citing pending legal proceedings. Jain and Rao did not respond to Reuters queries.

Jain is now Xiaomi''s global vice president based out of Dubai and is recognized for Xiaomi''s rise in India, where its smartphones are hugely popular.

According to Counterpoint Research, Xiaomi was the top smartphone seller in 2021 with a 24 percent market share. It also deals in other technologies, including smart watches and televisions, and has 1,500 employees in the country.


Several Chinese companies have struggled to do business in India due to political tensions following a border conflict in 2020. India has cited security concerns in banning more than 300 Chinese applications since then, as well as tightened enforcement requirements for Chinese businesses investing in the country.

In December, tax inspectors raided Xiaomi''s offices in India. Upon receiving information from the tax authorities, the Enforcement Directorate, which is looking into foreign exchange legislation, began reviewing Xiaomi''s royalty payments.

Xiaomi Technology India Private Limited (XTIPL) was sent a foreign currency equivalent of $725 million (roughly Rs. 5,570 crore) to entities abroad, despite the fact that Xiaomi had "no avail of any service."

"Simply substantial amounts in the name of redevances were remitted on the instructions of their Chinese parent group affiliates," the agency said.

According to a court filing, Indian agency officials "dictated and forced" Xiaomi India CFO Rao to include a sentence as part of his remarks "under extreme duress" on April 26.

"I admit the royalty payments have been made by XTIPL as per the instructions from certain individuals in the Xiaomi company," the line said.

Rao pulled out of the statement on April 27, stating that it was "not voluntary and made under pressure," according to the filing.

Two days later, the directorate issued an order to stop Xiaomi''s bank accounts.

Xiaomi has stated in a previous media statement that its royalty payments "are all legal and truthful," and that the payments were made for "in-licensed technologies and IPs used in Indian version products."

Gadgets 360 received a statement from a Xiaomi spokesperson, detailing the allegations.

"The contents of the writ petition are confidential qua public at large. There appears to be a desire to create some sort of sensationalism without considering the consequences that it will have on the government, the government, and the company. This matter is subjudice and under the consideration of court of law. We refuse to comment on this. We reserve our rights in all aspects and will take steps as soon as possible.

Thomson Reuters in 2022