Chinese smartphone maker Xiaomi Corp claims its executives faced threats of “physical violence” and coercion when questioned by India’s financial crime-fighting agency, according to a court document seen by Reuters.

In Xiaomi’s filing, officials from the Enforcement Directorate (ED) warned the company’s former India managing director Manu Kumar Jain, current chief financial officer Sameer BS Rao and their families that they would face “” Dire consequences” dated May 4.

The Education Department did not immediately respond to a request for comment.

Xiaomi has been under investigation since February, and last week Indian agencies seized $725 million in the company’s Indian bank accounts, saying it was illegally sending money abroad “under the guise of royalties.”

Xiaomi denies any wrongdoing, saying its royalties are legal. On Thursday, a judge heard from Xiaomi’s lawyers and set aside the Indian agency’s decision to freeze the bank’s assets. The next hearing is scheduled for May 12.

The company claims it was intimidated by India’s major law enforcement agencies when executives appeared in court several times in April for questioning.

According to documents filed with the High Court, Jain and Rao were under certain circumstances “threatened … to face arrest, impaired career prospects, criminal liability and physical violence if they did not make statements as directed by the agency.” Terrible consequences” in the southern state of Karnataka.

Executives “are able to withstand pressure for a period of time, [but] They eventually relented under such extreme and hostile abuse and pressure and made some statements involuntarily,” it added.

Xiaomi declined to comment, citing pending legal proceedings. Jain and Rao did not respond to Reuters inquiries.

Jain is now Xiaomi’s global vice president in Dubai and has been credited with the company’s rise in India, where its smartphones are hugely popular.

Xiaomi is the leading smartphone seller in 2021 with a 24% market share in India, according to Counterpoint Research. It also deals in other tech products, including smartwatches and TVs, and employs 1,500 people in the country.

fight for remittance

Many Chinese companies have been struggling to do business in India due to political tensions following the 2020 border conflict. Since then, India has banned more than 300 Chinese apps, citing security concerns, and tightened norms for Chinese companies investing in India.

In December, tax inspectors raided Xiaomi’s India offices. After receiving information from tax authorities, the Education Department, which investigates issues such as violations of foreign exchange laws, began reviewing Xiaomi’s royalties, court documents show.

The agency said last week that Xiaomi Technology India Sdn Bhd remitted the equivalent of 55.5 billion rupees ($725 million) in foreign currency to overseas entities, even though Xiaomi “did not receive any services from them”.

“Such a huge amount of royalties was remitted at the direction of its Chinese parent group entity,” the agency said.

During the investigation, Indian agency officials “ordered and compelled” Rao, Xiaomi India’s chief financial officer, to add a sentence to an April 26 statement “under extreme duress,” Xiaomi’s court documents said.

“I acknowledge that XTIPL has paid royalties as directed by certain persons in the Xiaomi Group,” the bank wrote.

A day later, on April 27, Rao withdrew the statement, saying it was “not voluntary and made under duress,” the documents show.

Two days later, the board ordered the assets in Xiaomi’s bank accounts to be frozen.

Xiaomi said in a previous media statement that it believed its royalties were “all legitimate and genuine” and paid for “licensed technology and IP used in our Indian version of the product”.

Its court filing said Xiaomi was “under attack because some of its affiliated entities were located outside of China.”