Lava International MD Hari Om Rai, who was arrested by the ED in a money laundering case on Tuesday, was approached by China's Vivo for helping them in establishing their business in India and, through his statutory auditor Rajan Malik, provided the corporate entity for establishment of the Vivo brand in India, the agency said.
The Enforcement Directorate, in its remand note, alleged that Rai was well acquainted with Malik.
"Vivo, China approached Rai for helping them in establishing their business. Thereafter, Rai arranged funds and Malik provided the corporate entity, namely Labquest Engineering Pvt Ltd, for establishment of Vivo brand in India," it said.
The ED also alleged that initial funding of Rs 3.17 crore for the purpose of setting up of offices or residential accommodation of Chinese nationals of Vivo Mobile India Pvt Ltd and its state distributor companies was provided by Rai and his company Lava International to Labquest Engineering.
It said that "no agreement" was executed between Labquest Engineering and Lava International for such transfer of funds.
"Furthermore, no collateral or security was given by Labquest towards Lava International for these fund transfers. This clearly shows that these fund transfers were not genuine business transactions. From May 2014 to December 2014 Lava International had transferred funds totaling to Rs 2.62 crore to the account of Labquest Engineering Pvt Ltd," the ED said.
Rai and Labquest Engineering had also helped Chinese Individuals associated with Vivo in their setup across India by arranging funds for the purpose of security deposit and in acquiring or arranging office spaces for the company and its other state distributor companies through their network across India.
"The help was not limited to monetary only; rather Labquest Engineering Pvt Ltd had authorised the employees of Lava International to execute the lease deeds for acquiring office spaces," the financial probe agency said.
The agency said that for instance in Mumbai, Lava International employees Amit Rai and Abhishek Jain had witnessed the execution deed between owners of the property and on behalf of Labquest Engineering and the said office space was used by Joinmay Electronics Pvt Ltd to carry out their business in Maharashtra.
Rai, during his statement, also admitted that there may be other people for whom the invitation letter may have been issued by Lava International, at the request of the office of Shen Wei, CEO of Vivo China.
The ED also alleged that it also found grave violation of employment visa rules for entry into India of office bearers by Vivo, China and its related companies in India
"Rai during his statement admitted that he was known to Shen Wei, CEO of BBK Technology Communication Co, Ltd. Therefore, the company Lava International Ltd has issued invitation letter for business visa for following Chinese nationals associated with Vivo Mobile Communication Co, Ltd, China and other Chinese entities," it alleged.
The ED also said that many employees of Vivo group companies worked in India without appropriate visa and in violation of business visa terms.
"Documents collected so far during investigation have revealed that at least 30 Chinese individuals entered India using business Visa with the intent to work as employees in Vivo companies. Though they worked for Vivo companies in India, they never disclosed Vivo companies as their employer in their visa applications. Thus, they have concealed information regarding their employer in their visas application and cheated Indian Embassy or Missions in China," it said.
The agency also said that during investigation, it came to light that various Chinese nationals have been traveling across India including sensitive places of J&K and Ladakh in gross violation of Indian visa conditions.
The ED earlier in the day arrested three executive of the Chinese mobile phone maker identified as Chinese national Guangwen Kyang aka Andrew Kuang, Malik, and chartered accountant Nitin Garg, as well as Rai.
The court sent them to three days of the ED custody.
The ED action comes almost more than a year after it carried out searches at 48 locations across the country belonging to Vivo Mobiles India Pvt Ltd and its 23 associated companies such as GPICPL and claimed that it has busted a major money laundering racket involving Chinese nationals and multiple Indian companies.
According to the ED, Vivo Mobiles India Pvt Ltd was incorporated on August 1, 2014 as a subsidiary of Hong-Kong based Multi Accord Ltd and was registered at ROC Delhi. GPICPL was registered on December 3, 2014 at ROC Shimla, with registered addresses of Solan, Himachal Pradesh and Gandhinagar, Jammu.
"The said company was incorporated by Zhengshen Ou, Bin Lou and Zhang Jie with the help of Nitin Garg, CA. Bin Lou left India on April 26, 2018. Zhengshen Ou and Zhang Jie left India in 2021," it had said.
The PMLA investigation by the ED was initiated by registering a money laundering case on February 3, 2022 on the basis of an FIR registered at the Kalkaji police station in the national capital by the Delhi Police against GPICPL and its Director, shareholders and certifying professionals, etc., on the basis of complaint filed by the Ministry of Corporate Affairs.
The ED's probe had revealed that the same director of GPICPL, namely Bin Lou, was also an ex-director of Vivo. He had incorporated multiple companies across the country spread across various states, a total of 18 companies around the same time, just after the incorporation of Vivo in the year 2014-15 and further another Chinese national Zhixin Wei had incorporated further 4 companies.
The ED had alleged that these companies are found to have transferred huge amount of funds to Vivo India.
"Further, out of the total sale proceeds of Rs 1,25,185 crores, Vivo India remitted Rs 62,476 crores. i.e, almost 50 per cent of the turnover out of India, mainly to China," the ED had claimed.
"These remittances were made in order to disclose huge losses in Indian incorporated companies to avoid payment of taxes in India," it had said.
Following the searches at multiple locations across the country, the agency had seized 119 bank accounts of various entities with gross balance to the tune of Rs 465 crores including FDs to the tune of 66 crores of Vivo India, 2kg gold bars, and cash amount to the tune of approximately Rs 73 lakh, the ED had said.
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