HC directs Vivo to give Rs 950-cr bank guarantee to operate bank accounts

The Delhi High Court (HC) on Wednesday allowed Chinese smartphone manufacturer Vivo to operate its bank accounts after furnishing a bank guarantee of Rs 950 crore. The next hearing is likely on July 28.

This comes after the Enforcement Directorate (ED) had frozen the bank accounts of the phone company and the HC had refused to unfreeze the accounts on July 8.

The phone manufacturer had said the account freeze would hamper its ability to pay for its liabilities, such as taxes and employee salaries.

After the last court order, the ED had asked Vivo to provide specific information supporting its claim that it currently has expenses of Rs 451 crore towards taxes, Rs 12 crore towards employee benefits, and Rs 2,363 towards operating expenses.

Acting on ED’s orders, the company had sent details of its liabilities which are yet to be analysed fully by the enforcement agency. Justice Yashwant Varma on Wednesday granted ED one week to process the company’s liabilities.

YES Bank, Bank of Baroda, HSBC Bank, ICICI Bank, Citibank, IDBI Bank, HDFC Bank, Standard Chartered Bank, and DBS Bank operate 10 accounts of Vivo in Gurugram, Noida, Delhi, and Mumbai.

Vivo, in its petition, said the scope of the Prevention of Money Laundering Act is very wide in nature and the ED must specify in writing that it has ‘reasons to believe’ the company was guilty.

Relying on various judgments, the company said the enforcement agency was encroaching on its rights and as a result, its 9,000 employees were left in the lurch.

The freeze is also depriving the exchequer of Rs 451 crore of statutory dues, it said.

The company stated before the court on Wednesday that it should be allowed to use the money not connected to the current searches. “Each day the ED takes to investigate the matter is slowly pushing us to our corporate death,” it said.

Meanwhile, the ED said the proceeds of the crime were far greater than the Rs 250 crore lying in the accounts of the company, and by that logic, it could not unfreeze the accounts.

Hearing the arguments, the court directed the company to furnish a bank guarantee of Rs 950 crore. It also allowed the company to operate its bank account on the condition that a balance of Rs 250 crore be maintained in all of its accounts.

Remittances to China should be disclosed to the ED, the court said.

Court order on July 8

Delhi HC on Friday told the ED to consider the representation of Vivo to allow it to unfreeze some bank accounts to pay for its liabilities. Justice Yashwant Varma asked the enforcement agency to give its reply to the plea filed by the company seeking to unfreeze some of its accounts.

The court directed Advocate Zoheb Hossain, counsel for ED, to take note of the relief sought by Vivo in the petition.

Vivo’s lawyers — Sidharth Luthra and Siddharth Agarwal — said there are liabilities such as taxes, tax deducted at source, and excise duties to be paid.

“There are thousands of employees in the company. There is an urgency as these liabilities are growing every day,” he said.

Meanwhile, ED’s counsel opposed Vivo’s plea to unfreeze the bank accounts, saying it was too soon to do so.

Writ petition filed to challenge term of ED director

A writ petition has been filed in the Supreme Court, challenging the extension of the term of the ED director to five years. The petition filed by a Congress leader also challenges the order issued by the central government in November 2021 to extend the term of the current director by a year.