Vivo PMLA case: Delhi court sends four accused to 3-day ED custody

A court in New Delhi sent four persons, including the managing director of Lava International mobile company and a Chinese national, to three-day Enforcement Directorate custody in a money-laundering case against Chinese smartphone-maker Vivo.

Additional Sessions Judge Devender Kumar Jangala passed the order on an application moved by the ED, which arrested the four earlier in the day.

They four arrested were identified as Hari Om Rai, the MD of Lava International, Chinese national Guangwen alias Andrew Kuang, and chartered accountants Nitin Garg and Rajan Malik.

"I am of the considered opinion that the custody remand of the accused persons Hari Om Rai, Nitin Garg, Rajan Malik and Guangwen Kuang is necessary.

“Accused persons… are accordingly remanded to ED custody till October 13," the judge said.

The application was opposed by Advocate Nitesh Rana, appearing for the accused, who claimed the allegations were false and that the ED lacked evidence.

The four accused were taken into custody under the provisions of the Prevention of Money Laundering Act (PMLA).

The agency had raided the company and persons linked with it in July last year, claiming to have busted a major money laundering racket involving Chinese nationals and multiple Indian companies.

The ED had then alleged that a whopping Rs 62,476 crore was "illegally" transferred by Vivo to China in order to avoid payment of taxes in India.

The agency told the court that Rai, "in collusion" with the three others "enabled Vivo, China to fraudulently establish a complex centrally controlled structure all over the country under the corporate veil of Vivo, India in circumvention of the extant FDI norms and by concealing the true nature of their ownership and control, by using forged identity cards.

Thus, they cheated the government authorities and in the process enabled Vivo, India (controlled by Vivo, China) acquire huge wrongful gains for themselves to the "detriment of economic sovereignty of the country", the ED said.

A Vivo spokesperson said the company "firmly adheres to its ethical principles and remains dedicated to legal compliance.

“The recent arrest deeply concerns us. We will exercise all available legal options."

In July last year, the agency had raided Vivo and people linked with the firm, claiming to have busted a major money laundering racket involving Chinese nationals and multiple Indian companies.

The crackdown on the leading Chinese company came after the central probe agency found that three Chinese nationals -- all of whom "left" India during 2018-21 --and another person from that country incorporated 23 companies in India in which they were also allegedly helped by CA Nitin Garg.

These 23 companies are found to have transferred huge amount of funds to Vivo India. Further, out of the total sale proceeds of Rs 125,185 crore, Vivo India remitted Rs 62,476 crore or almost 50 per cent of the turnover out of India, mainly to China, the ED had alleged.

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 seen as part of the Union government's effort to tighten checks on Chinese entities that are allegedly indulging in serious financial crimes like money laundering and tax evasion while operating here.

It is also being seen as continued crackdown on such firms and their linked Indian operatives.

These developments also come even as the military stand-off between the two countries along the Line of Actual Control (LAC) in eastern Ladakh has been ongoing for more than three years now.

Vivo, post the ED searches of July 5, 2022, had said it was "a responsible corporate and was committed to be fully compliant with laws."

The agency said it followed "all due procedures as per law" during the raids conducted under the criminal sections of the PMLA, but the "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."

The ED also said that after the raids, it seized funds worth Rs 465 crore kept in 119 bank accounts by various entities involved in the case, Rs 73 lakh in cash and 2 kg 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 (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 corporate affairs ministry 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 Corporate Affairs 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.