The money laundering case against Chinese smartphone maker Vivo is not just another economic offence but an attempt to destabilise India’s financial system and threaten its integrity and sovereignty, the enforcement directorate has told the Delhi High Court.
The federal financial fraud investigation agency has, in an affidavit before the court, claimed the bank accounts of the company frozen by the ED were used for laundering money.
It alleged the company engaged in the “offence of money laundering which is a heinous economic offence”.
The agency made the averments in the affidavit filed pursuant to the directions of Justice Yashwant Varma who had sought a response from the ED to a petition by Vivo seeking quashing of its order freezing its various bank accounts in connection with the money laundering probe.
The court is scheduled to hear the matter again on July 28.
“… the present case is not a case of mere commission of an economic offence but 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,” the enforcement directorate said in the affidavit.
Rejecting Vivo’s contention, it said there is no requirement to give any notice or communication before carrying out search and seizure or freezing the bank accounts under section 17 of the prevention of money laundering act.
“… The powers of the respondent (ED) with respect to freezing bank accounts are governed by section 17 of the PMLA and not by RBI guidelines, hence the contention of the petitioner (Vivo) does not hold good.”
“Moreover, sufficient safeguards have been provided under PMLA to redress the grievance of the petitioner. Instead of filing this writ petition, the petitioners should contest these grounds before the adjudicating authority,” it said.
The agency said it followed the due process of law while freezing the bank accounts of Vivo and its action cannot be said to be violative of article 21 (right to life and personal liberty) of the constitution.
“Moreover Article 19(1)(g) is a freedom granted in respect of a lawful trade, occupation and business and not in respect of a business conducted based on fraud and misrepresentation of identity,” it said.
The ED said 22 firms related to the India unit of the Chinese company are being investigated for suspicious transactions to China. These entities are held either by foreign nationals or foreign entities in Hong Kong.
“However, it is seen that majority of the funds have been transferred abroad to China which is suspicious and is being investigated,” it said.
On July 13, the high court had allowed Vivo to operate its various bank accounts frozen by ED, subject to furnishing a bank guarantee of Rs 950 crore within a week with the agency.
It had also directed the company to give details to ED about its remittances and issued notice to the investigating agency on Vivo’s plea seeking quashing of the order freezing its bank accounts.
The agency had quantified the current proceeds of crime at Rs 1,200 crore.
The high court had also asked the company to maintain a balance of Rs 251 crore in the bank accounts, an amount which was there when the accounts were frozen. The court had said the amount shall not be used till further orders.
While seeking quashing of the freezing order, Vivo has sought permission to operate its frozen bank accounts for making payments towards certain liabilities.
The probe agency had on July 5 raided several places across the country in the money laundering investigation against Vivo and related firms. The searches were carried out under the prevention of money laundering act (PMLA) in several states, including Delhi, Uttar Pradesh, Meghalaya, and Maharashtra.
Vivo’s counsel had contended that ED can only seize what it had discovered during the search operations and not the company’s bank accounts which were already disclosed to all the authorities concerned.
He had said freezing of the bank accounts has brought the functioning of the petitioner to a standstill when crores of rupees have to be paid as statutory dues apart from the payment of salaries to its employees. The ED’s counsel earlier claimed before the court that around 2014 a company –GPICPL– was set up using forged documents by “one person who is also the common ex-director of the petitioner”.
“An FIR came to be registered last year. 18 similar companies across India have been set up by Bin Lou (common ex-director of the petitioner). Large amounts of incriminating material have been found and are being analysed. All orders of Vivo were being placed through these 18 companies including GPICPL which alone has handled Rs 1,200 crores,” he had said.
On July 7, the investigating agency said Rs 62,476 crore had been “illegally” transferred by Vivo to China to avoid payment of taxes in India. This money is almost half of Vivo’s turnover of Rs 1,25,185 crore, it had said without disclosing the time period of the transaction.