SUMMARY
The court allowed Vivo to use its bank accounts on the condition that it furnishes a bank guarantee of INR 950 Cr
Delhi HC has also asked Vivo to maintain a bank balance of INR 250 Cr and submit all remittance details to the ED
After conducting raids at 48 locations of Vivo and related companies, the ED attached 119 bank accounts linked to the company holding INR 465 Cr
After refusing any interim relief, the Delhi High Court has allowed the de-freezing of the bank accounts of the Chinese smartphone maker Vivo on conditions. The HC has asked the company to provide a bank guarantee first to access the accounts.
The court allowed the de-freezing of Vivo’s bank accounts and operating the same on the condition that Vivo furnishes a bank guarantee of INR 950 Cr and maintains a balance of INR 250 Cr. The Delhi HC also ordered Vivo to share details of the remittances to ED.
After conducting raids at 48 locations of Vivo and related companies, the Enforcement Directorate (ED) attached 119 bank accounts linked to the company.
The bank accounts were said to hold around INR 465 Cr. The ED also seized ‘a large amount of incriminating evidence’ along with INR 73 Lakh in cash and 2 kg gold bars.
The federal financial crimes agency is investigating the Chinese smartphone maker on charges of money laundering by the company.
The Vivo Affair – A Timeline Of Events
April 2022: The Ministry of Corporate Affairs sought an inquiry to detect if there were irregularities in ownership and financial reporting at Vivo India. The Central Bureau of Investigation (CBI) started an investigation. After detecting financial irregularities, the CBI handed the case over to the ED.
July 5, 2022: The ED conducts searches across around 48 locations associated with Vivo and 23 associate companies such as Grand Prospect International Communication (GPICPL). The ED attached 119 bank accounts and seized ‘incriminating evidence’, INR 73 Lakh in cash and gold bars weighing two kilos.
In a written statement given to Inc42 that day, Vivo India’s spokesperson said, “Vivo is cooperating with the authorities to provide them with all required information. As a responsible corporate, we are committed to be fully compliant with laws.”
July 6, 2022: News surfaced from ED sources that the Chinese directors of Vivo India, Zhengshen Ou and Zhang Jie, had escaped the country in 2021.
On the same day, the spokesperson of the Chinese Embassy in India, Wang Xiaojian commented on the ongoing probe, saying that frequent investigation of Chinese companies by India disrupts normal business activities and damages their goodwill. Xiaojian also warned of a ‘chilling impact on business confidence’.
July 7, 2022: ED’s initial report revealed that out of the total revenue of INR 1,25,185 Cr, Vivo India sent INR 62,476 Cr or almost 50% of the same out of India in the form of remittances. The ED also revealed that most of the money went to entities based in China.
July 8, 2022: Vivo India approaches the Delhi High Court against ED’s move to freeze its bank account. The company stated that it has a liability as the company has around INR 2.826 Cr in monthly payments including the salaries of its 9,000 employees.
Vivo argued that ED’s action will prevent it from carrying out its liabilities like custom duties and GST as well. ED, on the other hand, had argued that it recovered incriminating evidence against Vivo during the searches.
July 9, 2022: After hearing both Vivo and ED’s counsels, Justice Yashwant Varma refused to give any interim relief to Vivo. However, Justice Varma ordered the ED to decide on Vivo’s representation in the court, keeping in mind the financial implications of any move that the ED makes in the case, by July 13.
July 13, 2022: The Delhi High Court orders the de-freezing of Vivo’s bank accounts, ordering the company to fulfil three conditions – submit INR 950 Cr in form of a bank guarantee, maintain INR 250 Cr in bank balance and submit remittance details to ED – before it can use its bank accounts.
