The ED submitted an affidavit calling Vivo money laundering an act of financial terrorism, citing an Orissa High Court ruling from 2020.
The Vivo India bank accounts are “clearly involved in money laundering,” according to the Enforcement Directorate, and this “has been carried out as an attempt to destabilize the financial system of the country and to threaten the integrity and sovereignty of the nation.”
The federal agency informed the Delhi High Court in an affidavit submitted late last week that 22 companies connected to the Chinese company’s India unit are being looked into for “suspicious” transfers to China. The 22 companies, according to the agency, are owned by foreign nationals or foreign organizations with Hong Kong headquarters. The majority of the funds, on the other hand, appeared to have been transferred overseas to China, which is suspicious and is under investigation, according to the affidavit. Vivo has previously declared that it obeys all local regulations.
The formation of the 22 companies and Grand Prospect International Communication Pvt Ltd (GPICPL), a Vivo distributor in Jammu and Kashmir, which allegedly misrepresented itself as a Vivo India subsidiary, have been examined by the ED.
GPICPL, which is already under investigation for allegations of money laundering, was allegedly “floated on the basis of forged documents,” according to the ED. According to the agency, “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.”
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The agency claimed that a chartered accountant from New Delhi who helped GPICPL incorporated had also assisted Vivo in doing the same in August 2014.
According to the affidavit, which ET has seen, GPICPL used the email address [email protected] in Ministry of Corporate Affairs filings, indicating a relationship between Vivo and GPICPL.
The ED states that “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.” The chartered accountant previously mentioned has been identified as aiding in incorporation or as a witness in processes related to nearly all of the 22 companies in the data shared by the ED with the high court.
The agency used an Orissa High Court ruling from 2020 that referred to money laundering as an act of “financial terrorism” to support its claim that it destabilized the financial system.
The 22 companies were allegedly founded by Bin Lou, a former director of Vivo, and Zhixin Wei, an another Chinese national. After Vivo India was founded in August 2014, Bin Lou founded 18 companies in 2014–15, while Wei founded four.
The two GPICPL directors, Zhengshen Ou and Zhang Jie, fled India ten days after the Delhi Police filed a first information report (FIR) against the J&K company on December 5, 2021, according to the agency, which has notified the high court. On December 15, 2021, the agency said that “the Chinese directors, instead of cooperating with Indian law enforcement agencies, fled the country.” According to the ED, a money laundering case was filed on February 3.
According to a review of GPICPL’s financial records, the company kept $1,487 crore in three accounts with two banks. A portion of this—roughly $1,200 crore—was given to Vivo Mobile India Pvt Ltd.
The debit freeze on Vivo India’s bank accounts by the ED earlier this month was described as “facetious in nature” in a court filing. The ED was allegedly “incapable of a rational explanation for freezing” the accounts, according to the company’s legal counsel.
The company was collaborating with the authorities to give them all the necessary information, the spokesperson had informed ET after ED had raided Vivo India and affiliated entities on July 5. The person stated, “As a responsible corporate, we are committed to be fully compliant with laws.” The ED claimed it had obtained “various incriminating documents, invoices, and details of transactions between GPICPL and Vivo Mobile India Pvt Ltd.” during the search operations on July 5.
The ED claimed that during the operation, Vivo India employees—including some Chinese nationals—did not participate and attempted to flee, remove, and conceal digital devices, which were found by the search teams. The agency refuted the company’s claims that its actions were “arbitrary or creating an atmosphere of extreme suspicion.”
In response to Vivo’s claim that the right to trade is a fundamental constitutional right, the agency stated that freedom is only guaranteed in related to legitimate trade, occupation, and business, and “not in respect to a business conducted on the basis of fraud and misrepresentation of identity.”
On July 13, the Delhi High Court gave Vivo India permission to use frozen bank accounts as long as it provided a bank guarantee in the amount of ‘950 crore within seven business days.
On July 12, Vivo India requested that ED lift the debit freeze on all of its bank accounts so that it may resume operations. The company claimed that the freeze “jeopardized its very existence” in the country.