ED arrests four, including Lava International MD, but why?

New Delhi, Oct 11, 2023, IANS

 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. 

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