Vivo's Bank Accounts Show Involvement In Money Laundering, ED Tells High Court

The Enforcement Directorate (ED) has claimed in the Delhi High Court that bank accounts of Chinese smartphone maker Vivo, which were seized by the agency, allegedly show its involvement in money laundering and it has been carried out as an attempt to destabilise the financial system of the country.

ED argued that the present offence allegedly committed by the company is the “offence of money laundering which is a heinous economic offence”.

The agency made the contentions in an affidavit filed in pursuance to the directions of Justice Yashwant Varma which had sought a response from ED on a petition by Vivo seeking quashing of an order freezing its various bank accounts in connection with the money laundering probe.

The court is scheduled to hear the matter on July 28.

The ED said, "Further it is submitted that the bank accounts seized by the respondent are clearly involved in money laundering".

“… 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,” ED said in the affidavit.

The agency said there is no requirement to give any notice or communication before search and seizure or freezing of bank accounts under Section 17 of the Prevention of Money Laundering Act (PMLA).

“… 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 the due process of law has been followed by it while freezing the bank accounts of Vivo and it cannot be said to be violative of Article 21 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.            

ED said that 22 firms related to the India unit of the Chinese company are being investigated for suspicious transactions to China and these 22 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 allowed Vivo to operate its various bank accounts frozen by ED, subject to furnishing of 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 various bank accounts.              
ED had contended that presently the proceeds of crime have been quantified to Rs 1200 crore.

The high court had also asked the company to maintain a balance of Rs 251 crore in the bank accounts, which was there at the time of freezing of the accounts, and the amount shall not be used till further orders.              

Besides seeking quashing of the freezing order, Vivo has sought permission to deal with its frozen bank accounts for making payments towards certain liabilities.              

The probe agency 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.             

Earlier, the high court had directed ED to attend to a representation made by Vivo seeking permission to deal with its frozen bank accounts for making payments towards certain liabilities.            

ED's counsel had said that the representation was general in nature.             

Vivo's counsel had contended that ED can only seize what they have discovered in their search operations and not the company's bank accounts which were already disclosed to all the authorities.           
He had said that freezing of the bank accounts has brought the functioning of the petitioner to a standstill and there are crores of rupees that have to be paid as statutory dues apart from the payment of salaries to its employees.             

ED's counsel had earlier informed the court that around 2014, a company –GPICPL-- was set up based on 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 1200 crores,” he had said.              

On July 7, the investigating agency said that 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 stating the time period of the transaction.