China on Monday urged India to conduct investigation “in accordance with laws and regulations” after mobile manufacturer Xiaomi India alleged that its officials were made to record their statements under coercion in a case related to violating the provisions of the Foreign Exchange Management Act.

“The Chinese side is closely monitoring the matter,” Chinese Foreign Ministry Spokesperson Zhao Lijian said at a press conference.

In a court filing on May 4, Xiaomi India had alleged that its top executives were threatened with “physical violence and coercion” during their questioning by the Enforcement Directorate in Bengaluru in April.

Xiaomi alleged that its top executives, India’s former managing director Manu Kumar Jain, current Chief Financial Officer Sameer BS Rao and their families, were threatened with “dire consequences” if the officials did not submit statements as desired by the Enforcement Directorate.

The Enforcement Directorate, however, refuted the claims. It said that it is a professional agency with strong work ethics and that the allegations were “untrue and baseless”.

Xiaomi India is the wholly-owned subsidiary of the China-based Xiaomi group.

On Monday, Zhao said that “the Chinese government always asks Chinese companies overseas to operate in accordance with laws and regulations”.

“In the meantime, we firmly support Chinese companies in protecting their lawful rights and interests,” Zhao said.

He also urged the Indian government to investigate the matter in a fair and just manner.

Case against Xiaomi India

In the case against Xiaomi India, the central agency has alleged that the company transferred Rs 5,551.27 crore to three foreign-based entities in February in violation of the foreign exchange law. On April 30, the Enforcement Directorate passed an order to seize the amount remitted from the bank accounts of Xiaomi.

However, on May 5, the Enforcement Directorate’s order was stayed by a single bench of the Karnataka High Court. The bench allowed Xiaomi India to use the bank account for its day-to-day activities.

The company had allegedly remitted funds to one Xiaomi group entity, and two others that are based out of the United States but ultimately benefit the Chinese firm.

The Enforcement Directorate had alleged that Xiaomi India procured completely manufactured mobile sets and other products from Indian producers but transferred an amount of Rs 5,551.27 crore to these three entities despite not availing itself of any of their services.