Vivo refutes charges of money laundering, financial terrorism

The local unit of Chinese mobile phone company Vivo told the Delhi High Court it hasn't laundered money or committed financial terrorism and has instead "contributed greatly towards the financial integrity and economic stability" of India. The Directorate of Enforcement (ED) had alleged that Vivo India laundered money in a bid to destabilise India's financial system.

The company denied in an affidavit submitted to the high court that it sent money to China to avoid payment of taxes in India. It said the remittances have a "legitimate basis and were towards the procurement of raw material and other services required for the mobile manufacturing business of the company". In its affidavit, seen by ET, the company said it "procures and imports certain components and raw materials from China for manufacturing its products, and duly remits payments for the same to its suppliers". The components imported from China include motherboards, semiconductors, printed circuit boards and sensors, it said.

The company said that "importantly, it is in the process of constructing a new manufacturing unit in India, for which it procures services related to consultancy, market research, architecture and R&D from China."


Freezing of A/cs Illegal, Says Co
It has paid the requisite custom duties towards such imports from China and other countries.

The company said that the ED seized data and documents belonging to the company during its search operations on July 5. "These include the underlying documentation for all the company’s transactions, including the transactions with respect to China," Vivo India said in its affidavit.

As first reported by ET on Sunday, the ED had said in its affidavit to the high court that the alleged laundering "has been carried out as an attempt to destabilise the financial system of the country and also to threaten the integrity and sovereignty of the nation". The agency had cited a 2020 Orissa High Court judgement that described money laundering as an act of "financial terrorism".

Vivo India said this citation was "merely a misplaced attempt to create an atmosphere of apprehension and suspicion around the company".

The company has 9,000 employees in India and has proposed investments of Rs 6,090 crore in Uttar Pradesh. Due to the freezing of its bank accounts by the ED on July 5, Vivo India has been unable to utilise its legitimate funds and its business operations are steadily moving towards a "certain civil and commercial death", it said in the affidavit. It added that the account freezing was "illegal, without jurisdiction and bad in law. ED has failed to comply with requirements of the Prevention of Money Laundering Act (PMLA)". The company alleged that the "ED has abused its powers and acted without jurisdiction. ED has acted capriciously, illegally and without jurisdiction".

Stating that its bank account details were available in the public domain, Vivo India said that the freezing "without any investigation or adjudication with regard to the funds deposited therein is excessive". The company has argued that its bank accounts cannot be mechanically termed as proceeds of crime.

It also responded to the charge of its alleged illegal involvement with Grand Prospect International Communication Pvt Ltd (GPICPL), a Jammu and Kashmir distributor of Vivo, which allegedly falsely projected itself as a subsidiary of Vivo India.

The company said the J&K company was an "independent third party having a separate legal entity that was engaged by it (Vivo India) for distributing/reselling its products in the states of Himachal Pradesh and Jammu & Kashmir." Vivo India said it cannot be made "vicariously liable for any misconduct attributable to GPICPL".

With regard to the two GPICPL directors who allegedly fled the country in December, 10 days after registration of a first information report (FIR) by Delhi Police according to the ED, the company said the two Chinese nationals "are strangers who are not linked" to Vivo India.

As for the money transferred by 22 companies linked to Vivo India, also being investigated by the ED, the company has said that they are "independent third parties having separate legal entities that were engaged by Vivo India for distributing/reselling its products in various states". The affidavit said, "There is a legitimate contractual agreement between Vivo India and these entities which have no common or cross-shareholding with Vivo India. (The company) is unaware of the shareholding structure of the 22 companies and also unaware of any alleged remittances of funds from the said companies to China."

On Wednesday, counsel for Vivo informed the high court that it had arranged the bank guarantee and had passed it on to the ED. The Delhi High Court had on July 13 permitted Vivo India to operate bank accounts that had been frozen, subject to the submission of a bank guarantee of Rs 950 crore within seven working days. At the request of the company, the high court condoned the delay in furnishing the bank guarantee.