Karnataka HC rejects Chinese firm Xiaomi's plea against the seizure of Rs 5,551.27 crore

Karnataka High Court has rejected Chinese firm Xiaomi'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 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. As 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 Amaintained that Xiaomi is a foreign entity and can not maintain writ petition.

Earlier, counsels for Xiaomi India had argued that the firm was being targetted 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 for foreign companies in connection with manufacturing and marketing smartphones.

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

He brought to the notice of the court that last year 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 is maintaining 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.