The Enforcement Directorate has alleged that the bank accounts of mobile phone company Vivo India are “clearly involved in money laundering” and this “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”.
In an affidavit filed late last week, the federal agency informed the Delhi High Court that 22 companies related to the India unit of the Chinese company are being investigated for “suspicious” transfers to China. The agency alleged that the 22 companies are owned by foreign nationals or overseas entities based in Hong Kong. “However, it is seen that the majority of the funds have been transferred abroad to China, which is suspicious and is being investigated,” the affidavit stated. Vivo has said previously that it abides by all local laws.
The ED has drawn a parallel between the incorporation of the 22 companies and 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 ED has alleged that GPICPL, which is already being investigated over charges of money laundering, was “floated on the basis of forged documents”. The agency has claimed that “during investigation it is observed that the same modus operandi was followed by M/s Vivo in different states of India by incorporating around 22 companies”.
The agency said a New Delhi-based chartered accountant who facilitated the incorporation of GPICPL had done the same for Vivo in August 2014.
Further, the email used by GPICPL was [email protected] in Ministry of Corporate Affairs filings, showing a connection between Vivo and GPICPL, according to the affidavit, which ET has seen.
“These findings give reasons to believe the close nexus between M/s GPICPL, a company floated on the basis of forged documents, and M/s Vivo,” according to the ED. In the data shared by the ED with the high court, the chartered accountant mentioned above has been shown as assisting in incorporation or as a witness in processes connected to almost all the 22 companies.
To buttress its charge of destabilising the financial system, the agency has referred to a judgement by the Orissa High Court, which, in 2020, had described money laundering as an act of “financial terrorism”.
Bin Lou, a former director of Vivo, and another Chinese national named Zhixin Wei allegedly set up the 22 companies. While Bin Lou set up 18 companies in 2014-15 after the incorporation of Vivo India in August 2014, Wei set up four.
The agency has informed the high court that the two directors of GPICPL, Zhengshen Ou and Zhang Jie, left India 10 days after the Delhi Police registered a first information report (FIR) against the J&K company on December 5, 2021. “The Chinese directors, instead of cooperating with Indian law enforcement agencies, fled the country” on December 15, 2021, the agency said. The ED said it registered a money laundering case on February 3.
An analysis of GPICPL’s finances showed that it maintained about `1,487 crore in three accounts with two banks, the agency said. About `1,200 crore of this was transferred to Vivo Mobile India Pvt Ltd.
Earlier this month, Vivo India had told the court that ED’s debit freeze of its bank accounts was “facetious in nature”. The company’s counsel had alleged that the ED was “incapable of a rational explanation for freezing” the accounts.
After ED had raided Vivo India and related entities on July 5, the spokesperson had told ET that the company was cooperating with the authorities to provide them with all the required information. “As a responsible corporate, we are committed to be fully compliant with laws,” the person said. During the search operations on July 5, the ED said it had gathered “various incriminating documents, invoices and details of huge transactions between GPICPL and Vivo Mobile India Pvt Ltd.”
During the operation, employees of Vivo India, including some Chinese nationals, did not cooperate and tried to abscond, remove and hide digital devices, which were retrieved by the search teams, the ED said. The agency denied that its action was “arbitrary or creating an atmosphere of extreme suspicion”, as alleged by the company.
Responding to Vivo’s contention that the right to trade is a fundamental right under the constitution, the agency said freedom is granted in respect of lawful trade, occupation and business and “not in respect of a business conducted based on fraud and misrepresentation of identity”.
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 `950 crore within seven working days.
ET was the first to report, on July 12, that Vivo India urged ED to defreeze its bank accounts so it could continue its business, contending that the debit freeze on all its accounts “jeopardised its very existence” in the country.