At least seven Chinese nationals associated with Vivo India have fled the country following investigations by the Enforcement Directorate (ED). The ED has accused Vivo China, Vivo India, and other entities of flouting foreign direct investment norms and visa conditions, as well as hiding beneficial ownership to create proceeds of crime worth over INR 20,000 crore ($2.6 billion). The charge sheet filed by the ED alleges that Vivo China used various methods to conceal its ownership of Vivo India and control its operations in the country. Vivo has denied all charges.
The charge sheet against Vivo China, Vivo India and 46 other entities and individuals was filed in the first week of December. A Delhi court took cognisance of the charge sheet last week.
“Vivo China and other entities have resorted to violation of multiple laws of India to give effect to their mala fide intentions. Ultimately by way of violation of FDI policy, visa violations, cheating and forgery etc., Vivo group companies acquired Proceeds of Crime (PoC), which were subsequently used for expansion of Vivo footprints in the country and siphoning off the same to foreign companies which were also owned/controlled by Vivo China,” said the charge sheet. HT has seen a copy.
The agency has estimated that since its inception in India in 2014 till March 2021, Vivo India remitted funds worth ₹70,837 crore out of ₹71,625 crore accumulated from the sale of phones and accessories.
Vivo China, to conceal its ownership of Vivo India, created an entity called Multi Accord in Hong Kong in February 2014, according to the charge sheet. The shares of Multi Accord were acquired by Ye Liao (first CEO and shareholder of Vivo India) in May 2014. All the technology and manpower were provided by Vivo China to Vivo India and its state distributor agencies.
“Thus, it is clear that Multi Accord Limited, which is located in Hong Kong, was incorporated only to conceal beneficial ownership and layer control of Vivo China in Vivo India,” the charge sheet said, adding that various employees of Vivo China were controlling the day-to-day business of Vivo India. “Even the servers containing data of Vivo India and its SDCs were controlled and maintained by Vivo China.”
Asserting that Vivo China devised a complex scheme to establish Vivo group companies in India, ED has said that 24 companies were incorporated in India, including Vivo Mobile India Pvt Ltd, GPICPL in Himachal Pradesh (operating in Jammu & Kashmir, Himachal Pradesh, and Ladakh) and others, which were operating under a corporate veil by hiding their true beneficial ownership.
The charge sheet claims that office bearers of Vivo China and its related entities submitted false information before the Indian embassy in China for getting visa for their travel to India, which “is a matter of grave national security concern”.
To circumvent the verification and scrutiny from Indian authorities, these Chinese nationals used Lava International Ltd (whose managing director Hari Om Rai has been arrested) to get invitation letters to avoid any suspicion. In addition, Vivo India arranged false declaration and documents in violation of the Foreigners Act for the Chinese nationals.
On how Chinese nationals worked here, ED said they used to come initially on a business visa, which is comparatively easy to get than an employment visa. However, in violation of visa conditions, they would work as employees in the company during their stay.
The foreign ministry has shared a list of 193 visas issued to foreign nationals, mostly Chinese, associated with Vivo India and its distributors, who came to India on business or employment visas since 2014. About 30 Chinese nationals out of these 193 came on business visas but worked in violation of norms, ED said.
There are instances of Chinese nationals fleeing the country after the searches and issuance of summons in July 2022, which indicates their intention to derail the investigation and conceal their wrongdoings, including money laundering, the agency added.
Those who have fled have been identified as He Chengshuai, Shang Yu, Xiaoyang Ye, who were employees of Vivo India; Zhang Haoran, Tu Chengchao, Ding Zhijie and Lijie Ye, who were directors in associate companies.
India’s foreign direct investment policy in 2014-15 laid down that 100% FDI in single-brand retail trading was not allowed without permission. However, Vivo India and its state distributors received 100% FDI under the automatic route, which meant that the distributors would not be able to carry out retail business activities in India, ED said.
To circumvent this and avoid attracting the notice of the authorities, Vivo India and the Chinese employees of Vivo China were aided and assisted by Hari Om Rai of Lava International and Rajan Malik, statutory auditor of Lava, who arranged an entity, Labquest Engineering Pvt Ltd, as a special purpose vehicle to control the business of retail sales related to Vivo mobile phones, according to the charge sheet.
The address of Multi Accord, which had majority shares in Vivo India, at Room number 901, Yip Fung Building, 2-12 D’Aguilar Street, Central, Hong Kong, as well as its four distribution firms, Aohua Mobile Pvt Ltd, Chhattisgarh; Regenvo Mobile Pvt Ltd, Uttar Pradesh; Joinmay Electronics Pvt Ltd, Maharashtra; and Fangs Technology Pvt Ltd, Tamil Nadu and two overseas trading companies, Lucky Crest Ltd, Hong Kong, and Honour Luck Ltd, Hong Kong “is also linked to Panama Papers – Offshore Leaks database”, the ED’s charge sheet alleged.
Vivo denied all charges.
“We are deeply alarmed by the current action of the authorities,” a Vivo spokesperson said. “The recent arrests demonstrate continued harassment and as such induce an environment of uncertainty amongst the wider industry landscape. We are resolute in using all legal avenues to address and challenge these accusations.”