Why ED arrested Lava International MD Hari Om Rai

New Delhi, Oct 11 In a big action against the Chinese mobile phone maker Vivo, the Enforcement Directorate (ED), India's financial probe agency arrested four persons, including a Chinese national and Hari Om Rai, the MD of Lava International.

The ED, however, mentioned that the arrest of Rai in money laundering case came as he was approached by Vivo, China for helping them in establishing their business in India and he provided initial funding of Rs 3.17 crore for setting up offices and residential accommodation of Chinese national of Vivo Mobile India Pvt Ltd and its state distributor companies through Labquest Engineering Private Limited.

The ED in its remand note alleged that Rai, the Managing Director of Lava International was well acquainted with Malik. Malik has been the Statutory Auditor of Lava International Limited.

"Vivo, China approached Rai for helping them in establishing their business. Thereafter, Rai arranged funds and Malik provided the corporate entity, namely Labquest Engineering Private Limited for the establishment of Vivo brand in India.

The ED alleged that initial funding of Rs 3.17 crore for the purpose of setting up offices or residential accommodation of Chinese nationals of Vivo Mobile India Private Limited and its state distributor companies was provided by Rai and his company Lava International Limited to Labquest Engineering Private Limited.

The ED said that "no agreement" was executed between Labquest Engineering Private Limited and Lava International Limited 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 Rs 2.62 crore to the account of Labquest Engineering Private Limited," the ED said.

The Enforcement Directorate said that Rai and Labquest Engineering had helped Chinese Individuals associated with Vivo, China in their setup across India by arranging funds for the purpose of Security Deposit and in acquiring or arranging office spaces for the company Vivo Mobile India Private Limited and its other state distributor companies through their network across India.

"The help was not limited to monetary only; rather Labquest Engineering Private Limited had authorized the employees of Lava International to execute the Lease deeds for acquiring office space for the state company," the financial probe agency said.

The agency said that for instance in Mumbai, the employees of Lava International -- 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 Private Limited to carry out their business in state of 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 Limited has issued invitation letters for business visas for following Chinese nationals associated with Vivo Mobile Communication Co, Ltd, China and other Chinese Entities," the financial probe agency alleged.

The ED also said that many employees of Vivo group companies worked in India without appropriate visas 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 visas 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 visa application and cheated the Indian Embassy or Missions in China," the ED 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 on Wednesday arrested executive of the Chinese mobile phone maker Vivo identified as Guangwen Kyang aka Andrew Kuang, the Chinese National; Nitin Garg, the Chartered Accountant (CA), Malik and Rai.

The court sent them to three days of ED custody on Wednesday.

The fresh action comes in the wake of the tensions between India and China amid the border row in Ladakh.

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 Private Limited 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 Multi Accord Ltd, a Hong Kong based company 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 PMLA investigation by 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.