Karnataka High Court rejects Chinese firm Xiaomi’s plea challenging ED

ED had seized the amount from the company's account and this was upheld by the Competent Authority. Xiaomi had challenged the Competent Authority's order in the HC

PGurus Newsdesk

April 22, 2023

ED had seized the amount from the company's account and this was upheld by the Competent Authority. Xiaomi had challenged the Competent Authority's order in the HC

Karnataka HC upholds seizure of Rs.5,551.27 cr from Xiaomi for FEMA violation

In a major blow to Xiaomi India, Karnataka High Court has rejected the Chinese firm’s plea against the seizure of Rs.5,551.27 crore from its bank accounts by the Enforcement Directorate (ED).

A single-judge bench of Justice M Nagaprasanna, on Friday, though dismissed the petition, upheld its maintainability.

The Chinese technology company is facing charges of violations of the provisions of the Foreign Exchange Management Act (FEMA).

The bench observed that the challenge to the Constitutional validity of Section 37A of the Act by the petitioner is held to be maintainable, on the fulcrum of the allegation that it is violative of Article 14 of the Constitution. Article 14 is person-centric whereas Fundamental Rights under Article 19 are citizen-centric.

Appearing for the Central government and the ED, Additional Solicitor General M B Nargund maintained that Xiaomi is a foreign entity and can not maintain a writ petition.

Earlier, counsels for Xiaomi India had argued that the firm was being targeted as it is a Chinese company and other companies are allowed to make payments of technology royalty. They have also brought to the notice of the court that banks are not allowing Xiaomi to make remittances in foreign exchange for imports.

They argued that the company is required to make payments to foreign companies in connection with manufacturing and marketing smartphones.

Contesting this Additional Solicitor General Nargund explained that the authorities had no complaints if Xiaomi is agreeable to keeping the seized amount in the bank and using the remaining amount.

He brought to the notice of the court that on April 24 and 29, before the ED passed the order to seize Xiaomi’s bank accounts, there was a transfer of around Rs.1,500 crore from the company’s bank accounts as per the available information.

However, Xiaomi maintained that royalty payments made to three companies abroad would not violate the FEMA Act. The company further maintained that the IT department itself had allowed it as a value-added activity.

[With Inputs from IANS]

PGurus is now on Telegram. Click here to join our channel and stay updated with all the latest news and views

For all the latest updates, download PGurus App.