ED arrests four persons including CA in Money Laundering Case against Vivo

The Enforcement Directorate (ED) has arrested four people, including the MD of the Lava International mobile company and a Chinese national, as part of its ongoing money-laundering investigation into Chinese smartphone maker Vivo, according to official sources on Tuesday.

Hari Om Rai, the MD of Lava International, Chinese national Guangwen Kyang, Chartered Accountant Nitin Garg, and a man named Rajan Malik were identified as the four.

They were detained in accordance with the provisions of the Prevention of Money Laundering Act (PMLA).

An e-mail sent to Lava International seeking a response did not receive a prompt response. Lava International, a domestic smartphone manufacturer, claims to have a 1-2% market share in the smartphone market.

In July of last year, the agency raided Vivo and its associated individuals, claiming to have busted a major money laundering ring involving Chinese nationals and multiple Indian companies.

The ED then claimed that Vivo “illegally” transferred Rs 62,476 crore to China in order to avoid paying taxes in India.

The crackdown on the leading Chinese company came after the federal investigation agency discovered that three Chinese nationals, all of whom “left” India between 2018 and 21, and another person from that country formed 23 companies in India, with the assistance of CA Nitin Garg.

These 23 companies were discovered to have transferred large sums of money to Vivo India. Furthermore, the ED claimed that out of the total sale proceeds of Rs 1,25,185 crore, Vivo India remitted Rs 62,476 crore, or nearly 50% of the turnover, out of India, primarily to China.

It went on to say that the remittances were made in order to “disclose huge losses in Indian incorporated companies in order to avoid payment of taxes in India.”

The action is seen as part of the Union government’s effort to tighten controls on Chinese entities operating in India and allegedly engaging in serious financial crimes such as money laundering and tax evasion. It is also seen as a continuation of the crackdown on such firms and their associated Indian operatives.

These developments come as the two countries have been locked in a military standoff along the Line of Actual Control (LAC) in eastern Ladakh for more than three years.

Following the ED searches on July 5, 2022, Vivo stated that it was “a responsible corporate and was committed to being fully compliant with laws.”

While the agency claimed 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 also claimed that “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 stated that following the raids, it seized funds totaling Rs. 465 crore held in 119 bank accounts by various entities involved in the case, as well as Rs 73 lakh in cash and two kilogrammes of gold bars.

After studying a Delhi Police FIR (Kalkaji police station) from December last year against a Vivo-affiliated company, Grand Prospect International Communication Pvt Ltd (GPICPL), its directors, shareholders, and some other professionals, the agency filed an enforcement case information report (ECIR), the ED equivalent of a police FIR, on February 3.

The Corporate Affairs Ministry filed the police complaint, alleging that GPICPL and its shareholders used “forged” identification documents and “falsified” addresses when the company was formed in December of 2014.

This company had registered offices in Solan, Himachal Pradesh, Gandhinagar, Gujarat, and Jammu, Jammu and Kashmir. The three Chinese nationals mentioned above established this company, and a fourth, Zhixin Wei, established four companies to conduct 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 office of the attorney general stated.

According to the company, Vivo Mobiles Pvt Ltd was founded on August 1, 2014 as a subsidiary of Multi Accord Ltd, a Hong Kong-based company.

The Other 22 Companies was identified 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).