BEIJING, October 13 (TMTPost)—Vivo vowed to safeguard rights and interests for its employees after executives were arrested by the Indian government.

Credit：Visual China

Vivo is keeping a close eye on recent investigations and gets ready to respond with “all available legal options”, the Chinese mobile brand told the state-run newspaper Shanghai Securities News, adding that it firmly abides by local laws and regulations in India.

The Chinese government always asked domestic companies to operate legally overseas while supporting companies in protecting their rights, China’s Commerce Ministry replied to Reuters following Vivo’s response. The ministry said Beijing also hopes India will provide a fair, just, transparent and unbiased environment for Chinese companies.

The aforementioned investigations refer to the enforcement action Indian government took against Vivo’s officials on Tuesday. India’s financial crimes agency, the Enforcement Directorate (ED), arrested four Vivo executives including one Chinese national working in India in a case of alleged money laundering.

The allegation originated in July 2022, when the ED said it had raided 48 Vivo locations in India and blocked 119 bank accounts to freeze 4.65 billion rupees ($58.76 million) of assets under Vivo and its associates. A month after the ED’s actions, the Directorate General of Revenue Intelligence (DRI) announced accusation of evading Rs. 22.17 billion (about US$ 280 million) in tax payment. The apex anti-smuggling agency previously said a search of Vivo India's factory in August 2021 revealed incriminating evidence indicating Vivo India involvement in willful mis-declaration in the description of certain items imported, which were used in the manufacture of cell phones.

Tuesday's arrest may lead to a criminal lawsuit as it came under the Prevention of Money Laundering Act (PMLA). PMLA is"a very stringent law and allows for criminal cases to be filed, unlike regular foreign exchange violations which are majorly considered civil offenses," BBC cited Atul Pandey, Senior Partner at legal firm Khaitan.

Vivo is the second-biggest smartphone brand after Samsung in India. In the quarter ended June this year, Vivo held 17% of market share by shipments, just shy of Samsung's share of 18%, according to Counterpoint Research, a global market research firm in the TMT industry.

Indian authorities have also targeted other Chinese mobile phone makers these years. The Indian Revenue Service under India's Ministry of Finance conducted raids on two "foreign-owned" cell phone companies in various provinces across India on December 21, 2021, and found multiple tax issues in two companies, including royalty evasion and undisclosed related party transactions. Local media reported that the two companies referred to Xiaomi and OPPO. Huawei has been also investigated by the Indian tax authorities since February, 2021.

The ED announced in April 2022 the seizure of Rs. 55.51 billion of assets from Xiaomi Technology India Pvt.’s bank accounts. The seizure was made on the grounds that Xiaomi and its Indian subsidiaries violated the provisions of India’s Foreign Exchange Management Act 1999 by illegally remitting money to foreign entities through royalty payments falsely claimed. At an earnings call last month, Xiaomi President Lu Weibing clarified that the Indian government has frozen, not confiscated, his company’s RMB4.8 billion (US$658 million) of funds due to a local legal dispute. Lu reiterated Xiaomi will firmly proceed with the legal actions in India.

New Delhi has tightened regulation on investments from neighboring countries in 2020. Chinese smartphone manufacturers such as Xiaomi, OPPO, realme, and Vivo were asked by authorities to appoint Indian nationals as executives like CEO, chief operating officer (CPO), chief financial officer (CFO) and chief technical officer (CTO), the Economic Times, an Indian newspaper, reported in June. These phone makers were also required to introduce Indian equity partners in their Indian businesses, appoint Indian contract manufacturers, increase local manufacturing down to the component level through joint ventures with local businesses, expand exports from the Southern Asian country and have local distributors, according to the report.

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