Xiaomi moves HC against seizure of Rs 5,500-cr assets

The High Court of Karnataka on Thursday adjourned until October 14 the hearing on a petition filed by Xiaomi Technology India Private Limited.

Xiaomi had filed the petition against the order confirming the Enforcement Directorate’s seizure of the Chinese company’s bank assets worth over Rs 5,500 crore for alleged violations of the Foreign Exchange Management Act (FEMA).

The company challenged the September 30 order passed by the competent authority appointed under Section 37A of the act confirming the seizure order dated April 29, 2022.

Xiaomi questioned the constitutional validity of Section 37A of FEMA. It argued that Section 37A is bereft of guidelines and vague as it allows confiscation without adjudication of guilt of the violation of FEMA. Xiaomi’s petition stated that the competent authority passed the order without applying its mind and gave no opportunity to examine representatives of the bank.

A vacation bench presided over by Justice N S Sanjay Gowda heard the matter.

Appearing for Xiaomi, senior advocate Uday Holla prayed for interim relief to enable the company to operate the bank accounts to fulfil the day-to-day obligations. He cited a similar interim order passed by the high court in May 2022 on the company’s petition against the ED seizure order.

Additional Solicitor General M B Nargund opposed the request, accusing the company of “using and misusing” the earlier interim order. The court was informed that as of October 4, 2022, the actual amount available with the company is only around Rs 3,900 crore. It was also pointed out that Xiaomi has an alternative remedy to approach the appellate authority.

The court asked Xiaomi’s counsel to seek instructions as to whether the company is prepared to give a bank guarantee for the amount being claimed by the authorities. On instructions, the advocate informed the court that the company would open a separate account and the revenue earned will be credited to the account with effect from January 2023.