Why Chinese companies and ED disagree

The high court on Friday asked ED to respond to Vivo’s appeal challenging the freezing of its bank accounts and rule on the company’s request for permission to operate the accounts within a week. .

Discoveries in the probe

On Thursday, the ED carried out searches and seizures at 48 Vivo sites and 23 related entities over allegations that proceeds from the sale of the Indian branch were transferred out of the country to show losses and avoid paying taxes. taxes.

The agency blocked nearly 119 bank accounts linked to the Indian operations of Vivo and its associates which held 465 crores, in connection with alleged money laundering by the smartphone maker.

These 23 companies were found to have transferred huge sums of money to Vivo India. “Of the total proceeds from the sale of 1.25, 185 crore, Vivo India handed over 62,476 crores or nearly 50% of revenue out of India, mostly to China,” an ED statement said. These remittances were made in order to disclose huge losses in Indian companies incorporated in order to avoid paying taxes in India, ED alleged.

“Vivo India employees, including some Chinese nationals, did not cooperate with the search procedure and attempted to flee, remove and hide digital devices which were recovered by the search teams,” said ED. This was cited as one of the main reasons. for the enforcement agency’s action against the Chinese company.

Vivo’s petition

Vivo said in the petition that a “serious injustice” would be done to the company due to ED’s decision. It will also have a negative impact on the company’s reputation and business operations, he said.

Further, the freezing of bank accounts will have a negative impact on the petitioner’s operations in India and globally and will hamper any current or future business operations that the petitioner conducts through these bank accounts, the petitioner added.

Vivo argued that if funds in its bank accounts continued to be frozen, the company would be in further violation of the law if it was unable to meet its legal obligations to the relevant authorities under various laws.

“The freeze also prevents the payment of wages for thousands of company employees,” Vivo said in its 97-page petition.

Vivo, in its representation to the polling firm, pointed out that monthly payments of approximately 2,826 crore is to be paid for statutory dues, wages, rent, funds for daily business operations, etc., including a refund of funds to consumers who canceled online orders and service of finance facilities from various banks.

Xiaomi probe

In April, a similar investigation was conducted by the Enforcement Branch against Xiaomi India under which it seized nearly 5,551 crore of the company which was in the bank account of the company under the provisions of the Foreign Exchange Management Act 1999. ED began its investigation into illegal fund transfers made by the company earlier in February this year.

Following this, Xiaomi approached the Karnataka High Court against the polling agency.

The High Court granted partial relief to the company by suspending the April 29 seizure orders.

The company in the petition also alleged that senior executives Manu Kumar Jain, former Managing Director of India and Sameer Rao, CFO of Xiaomi India, and their respective families were threatened with dire consequences including arrest, damage to career prospects, criminal liability. and physical violence by the agency.

ED, however, rejected all of the Chinese firm’s claims and called them “baseless”. The case is pending in court.

What the Chinese Embassy said

Strongly condemning ED’s raids on the Chinese multinational, Wang Xiaojian, spokesperson for the Chinese Embassy in India, said on Wednesday that Indian authorities’ frequent investigations into Chinese companies “chills confidence and willingness of market entities from other countries, including those from China to invest”. in India”.

Even though China-India economic and trade cooperation is based on mutual benefits and win-win results, the Chinese government has always required its companies to comply with local laws and regulations in their overseas operations, said the embassy, ​​adding the Chinese government. will firmly support its businesses to maintain their legitimate rights and interests.

“The frequent investigations by Indian authorities on Chinese companies not only disrupt normal business activities and damage goodwill, but also hinder the improvement of the business environment in India,” the spokesperson said.

China expects the Indian side to investigate and enforce according to laws and regulations while providing a fair, just and non-discriminatory business environment for Chinese companies to operate and invest in India, he added.

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