A whopping Rs 62,476 crore has been “illegally” transferred by smartphone maker Vivo to China in order to avoid payment of taxes in India, the Enforcement Directorate said Thursday, as it claimed to have busted a major money laundering racket involving Chinese nationals and multiple Indian companies.
This money is almost half ofturnover of Rs. 1,25,185 crore, it said without stating the time period of the transaction.
The crackdown on the leading Chinese company came after the federal probe agency found that three Chinese nationals, all of whom “left” India during 2018-21, and one other person from that country incorporated as many as 23 companies in India in which they were also helped by a Chartered Accountant, Nitin Garg.
Among the foreigners, one identified as Bin Lou was an ex-director of Vivo and, according to the ED, he left India in April, 2018. Two others — Zhengshen Ou and Zhang Jie — left the country in 2021, it said.
“These (23) companies are found to have transferred huge amounts of funds to Vivo India. Further, out of the total sale proceeds of Rs. 1,25,185 crore, Vivo India remitted Rs. 62,476 crore or almost 50 per cent of the turnover out of India, mainly to China,” the ED said in a statement.
These remittances, it added, were made in order to “disclose huge losses in Indian incorporated companies to avoid payment of taxes in India.” The action is being seen as part of the Union government’s steps to tighten checks on Chinese entities and the continued crackdown on such firms and their linked Indian operatives that are allegedly indulging in serious financial crimes like money laundering and tax evasion while operating here.
The stepped-up action against the Chinese-backed companies or entities operating in India comes in the backdrop of the military stand-off between the two countries along the Line of Actual Control (LAC) in eastern Ladakh that has been ongoing for more than two years now.
The statement came after the ED raided 48 locations of Vivo Mobiles India Pvt. Ltd. and its associated companies across the country on July 5.
Vivo had said on Tuesday that “as a responsible corporate, we are committed to be fully compliant with laws.” The agency said while it followed “all due procedures as per law” during the raids conducted under the criminal sections of the Prevention of Money Laundering Act (PMLA), it alleged “employees of Vivo India, including some Chinese nationals, did not cooperate with the search proceedings and tried to abscond, remove and hide digital devices which were retrieved by the search teams.” Recently, Indian intelligence agencies had found that the data of domestic customers was being “illegally” transferred by Chinese companies to servers kept in that country.
The ED also said post the raids, it seized funds worth Rs. 465 crore kept in 119 bank accounts by various entities involved in the case, Rs. 73 lakh cash and 2kg gold bars.
The agency filed an Enforcement Case Information Report (ECIR), the ED equivalent of a police FIR, on February 3 after studying a Delhi Police FIR (registered at Kalkaji police station) of December last year against a associated company of Vivo, Grand Prospect International Communication Pvt Ltd (GPICPL), its directors, shareholders and some others professionals.
The police complaint was filed by the Ministry of Corporate Affairs alleging that GPICPL and its shareholders used “forged” identification documents and “falsified” addresses at the time of incorporation of the company in December, 2014.
This company had its registered address in Solan (Himachal Pradesh), Gandhinagar (Gujarat) and Jammu (J&K). The three Chinese nationals, mentioned above, incorporated this company while a fourth one, Zhixin Wei, also opened four companies to carry out similar transactions.
“The allegations (made by the ministry) were found to be true as the investigation revealed that the addresses mentioned by the directors of GPICPL did not belong to them, but in fact it was a government building and house of a senior bureaucrat,” the ED said.
It said Vivo Mobiles Pvt Ltd was incorporated on August 1, 2014 as a subsidiary of Multi Accord Ltd, a Hong Kong-based company.
The ED identified the other 22 companies as: Rui Chuang Technologies Pvt Ltd (Ahmedabad), V Dream Technology & Communication Pvt Ltd (Hyderabad), Regenvo Mobile Pvt Ltd (Lucknow), Fangs Technology Pvt Ltd (Chennai), Weiwo Communication Pvt Ltd (Bangalore), Bubugao Communication Pvt Ltd (Jaipur), Haicheng Mobile (India) Pvt Ltd (Delhi), Joinmay Mumbai Electronics Pvt. Ltd (Mumbai), Yingjia Communication Pvt Ltd (Kolkata) and Jie Lian Mobile India Pvt. Ltd. (Indore).
The rest are Vigour Mobile India Pvt Ltd (Gurugram), Hisoa Electronic Pvt Ltd (Pune), Haijin Trade India Pvt Ltd (Kochi), Rongsheng Mobile India Pvt Ltd (Guwahati), Morefun Communication Pvt Ltd (Patna), Aohua Mobile India Pvt Ltd (Raipur), Pioneer Mobile Pvt Ltd (Bhubaneswar), Unimay Electronic Pvt Ltd (Nagpur), Junwei Electronic Pvt Ltd (Aurangabad), Huijin Electronic India Pvt Ltd (Ranchi), MGM Sales Pvt Ltd (Dehradun) and Joinmay Electronic Pvt Ltd (Mumbai).