Karnataka: HC reserves judgment on Xiaomi’s plea challenging ED

Bengaluru: Karnataka High Court (HC) has reserved its judgment on a petition by the Chinese firm Xiaomi against the seizure of Rs 5,551.27 crores from its bank accounts by the Enforcement Directorate (ED).

The Chinese technology company is facing charges of violations of the provisions of the Foreign Exchange Management Act. A bench headed by Justice S.G. Pandit reserved the order on Wednesday for the verdict.

Xiaomi was represented by senior counsels S. Ganeshan and Sajan Poovaiah. Additional Solicitor General M.B. Nargund appeared for the central government and the ED.

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 M.B. Nargund had 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 is maintaining that royalty payments made to three companies abroad would not violate the FEMA Act. It further maintained that the IT department itself had allowed it as a value-added activity.