NEW DELHI • The director of the Indian firm which burst onto the scene last year claiming to be selling the world's cheapest smartphone at S$5 has been arrested on allegations of fraud.
A distributor of the phone claimed it had not received the handsets it had paid for from Mr Mohit Goel, 29, the director of Ringing Bells, BBC News reported yesterday.
The company's Freedom 251 phone, priced at 251 rupees, caused a sensation when it was announced due to its low price. It went on pre-sale in February last year.
Ringing Bells, then an unknown company, was overwhelmed by about 75 million orders.
In the middle of last year, various Indian agencies launched investigations into the company. There was also one by the police for possible cheating.
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$5 Price of the Freedom 251, the world's cheapest smartphone
Several business analysts had said that the company might be offering a "Ponzi scheme", where money is collected for a non-existent product or service.
Many customers received the phones, but the company is accused of not fulfilling all of its orders, the BBC said.
Ayam Enterprises, the distribution company that made the complaint, said it paid three million rupees after Mr Goel, a former dried fruit businessman, persuaded it to distribute the phone.
But it claimed that only 1.4 million rupees worth of devices were delivered. Ayam Enterprises also alleged that its staff received death threats when they asked for refunds.
A police spokesman confirmed the arrest to the BBC and Mr Goel was slated to appear in court yesterday.
"A number of similar complaints have been filed against him from other parts of the state. We want to investigate these claims thoroughly," said police officer Rahul Srivastava. "It's important for us to expose these scams because innocent people end up losing their hard-earned money."
The Freedom 251 phone has a 4-inch touchscreen, a quad core processor, front and back cameras, and seven applications. It is assembled in Haridwar, near New Delhi.
"If we are not able to deliver (the phones)... we will face it. But I am not going to run away," Mr Goel had said last year.
He said that 65 per cent of the phone's parts are made in India and the rest of the phone includes Taiwan-made chipsets.
India is the world's fastest-growing smartphone market. There are more than 220 million estimated users in a population of 1.25 billion, and the market is increasing by around 23 per cent annually.
