In a significant development, at least seven Chinese nationals connected with Vivo India have reportedly fled the country following investigations by the Enforcement Directorate (ED). The ED has charged Vivo China, Vivo India, and numerous other entities with violating foreign direct investment (FDI) norms, visa conditions, and concealing beneficial ownership, resulting in alleged proceeds of crime exceeding ₹20,000 crore ($2.6 billion). The charge sheet contends that Vivo China employed various tactics to hide its ownership of Vivo India and manipulate its operations within the country. Vivo has vehemently denied all allegations.
The charge sheet, filed in early December against Vivo China, Vivo India, and 46 other entities and individuals, received acknowledgment from a Delhi court 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,” states the charge sheet.
The ED estimates that, from its inception in India in 2014 until March 2021, Vivo India transferred funds amounting to ₹70,837 crore out of ₹71,625 crore accumulated from the sale of phones and accessories.
To conceal ownership, Vivo China established an entity named Multi Accord in Hong Kong in February 2014. Shares of Multi Accord were acquired by Ye Liao, the first CEO and shareholder of Vivo India. The charge sheet alleges that various employees of Vivo China controlled the day-to-day operations of Vivo India, including servers containing critical data.
The ED asserts that Vivo China implemented a complex scheme involving the incorporation of 24 companies in India, operating under a corporate veil to hide their true beneficial ownership.
Regarding visa violations, the charge sheet claims that Chinese nationals associated with Vivo India used deceptive means, including false declarations and documents, to work in India on business visas in violation of visa conditions. The charge sheet also raises concerns about national security regarding false information submitted to the Indian embassy in China for obtaining visas.
The list of 193 visas issued to foreign nationals, mostly Chinese, associated with Vivo India and its distributors, has been shared by the foreign ministry. The ED alleges that about 30 Chinese nationals out of these 193 violated visa norms by working in India on business visas.
Chinese nationals identified as He Chengshuai, Shang Yu, Xiaoyang Ye, Zhang Haoran, Tu Chengchao, Ding Zhijie, and Lijie Ye, who were either employees of Vivo India or directors in associate companies, have reportedly fled the country after ED’s investigations.
Vivo India, along with its state distributors, received 100% FDI under the automatic route, contrary to India’s FDI policy in 2014-15. The charge sheet suggests that entities associated with Vivo India, including Hari Om Rai of Lava International and Rajan Malik, statutory auditor of Lava, facilitated the violation of norms.
Vivo responded to the charges, stating, “We are deeply alarmed by the current action of the authorities. The recent arrests demonstrate continued harassment and induce an environment of uncertainty amongst the wider industry landscape. We are resolute in using all legal avenues to address and challenge these accusations.”
