MC EXCLUSIVE SFIO set to charge Chinese handset maker Vivo in fund diversion case this month

Vivo, India’s top smartphone brand by volume and the third largest by value after Apple and Samsung, is expected to challenge the government’s findings once the chargesheet is filed

The Serious Fraud Investigation Office (SFIO) will file its chargesheet against Chinese smartphone maker Vivo in December in an alleged fund-diversion case involving more than Rs 2,000 crore, government sources told Moneycontrol.

The charges have been brought under Section 447 of the Companies Act, 2013, which deals with corporate fraud and carries both civil and criminal penalties. The final penalty will be determined by the Registrar of Companies once the chargesheet is adjudicated, the sources said on condition of anonymity.

According to officials, the wider probe into Vivo, Oppo and Xiaomi has uncovered suspected fraud of over Rs 6,000 crore, signalling major compliance issues at the three Chinese smartphone brands.

“The chargesheet against Vivo will be filed in December itself as the investigation report is completed, the process is complete. There is still time before chargesheets are filed in the cases of Xiaomi and Oppo,” a government source told Moneycontrol. “In Vivo’s case, the fraud has been quantified at more than Rs 2,000 crore.”

The investigation began after the Ministry of Corporate Affairs (MCA) directed the SFIO to examine Chinese smartphone makers following a Registrar of Companies (RoC) report that alleged fund diversion of around Rs 6,000 crore, as Moneycontrol reported on August 13. The SFIO, a specialised agency within the MCA that handles complex corporate fraud cases involving significant financial irregularities, launched the probe in March this year.

“There is a clear money trail in Vivo’s case, with evidence of fund diversion and diversion of profits. The charges against Vivo have been framed under Section 447 of the Companies Act, 2013. The penalty will be determined once the Registrar of Companies adjudicates the case. The minimum and maximum fines are specified in the chargesheet based on the relevant sections,” the source added.

SFIO investigations generally involve scrutinising company records, financial transactions, and related-party arrangements. The agency can also summon directors and senior executives for questioning. Cases are referred to by the SFIO by the Centre, often following findings by the RoC or other regulatory bodies. Once an investigation is complete, the SFIO submits a detailed report to the ministry, which may initiate legal proceedings before a special court.

Vivo, India’s top smartphone brand by volume and the third largest by value after Apple and Samsung, is expected to challenge the government’s findings once the chargesheet is filed, company executives said. Queries sent to Vivo, Oppo and Xiaomi went unanswered.

Vivo is already entangled in multiple legal disputes, most notably a major money laundering case filed by the Enforcement Directorate (ED), which alleges that the company transferred billions of dollars out of India to evade taxes.

In May this year, a Delhi court summoned top Vivo executives — including the CEO, CFO and CEO of Vivo Mobile India — in connection with the case.

The ED had filed a money-laundering case of Rs 20,241 crore against Vivo and related entities in 2022. The chargesheet alleged that the accused set up a complex and fraudulent corporate structure that generated large revenues, which were then remitted outside India under the guise of importing goods.

“The multiple business entities were controlled by a single entity, i.e. Vivo China. In this manner, they siphoned off proceeds of crime to the tune of Rs 20,241 crore outside India,” the ED chargesheet said.

Vivo with Dixon Technologies is also currently awaiting Press Note 3 (PN3) approval from the Indian government for their proposed manufacturing joint venture.

Under the JV, Dixon will hold a 51 percent stake and Vivo India 49 percent. The unit will manufacture smartphones and other electronic devices, and requires PN3 clearance since Vivo is a Chinese company from a country sharing a land border with India.

Vivo earlier sold its older leased manufacturing unit in Greater Noida to Bhagwati Enterprises, the manufacturing arm of Micromax Informatics, as part of a broader plan to consolidate and shift to a larger company-owned facility in the same area, which is now operational. However, the older plant continues to manufacture some Vivo smartphone models through Bhagwati.