Debangana Ray
Published on June 16, 2022 at 19:28 IST
The Karnataka High Court reserved his verdict on a plea by the Chinese Company, Xiaomi challenging an order by the Enforcement Directorate seizing an amount of Rs. 5551.27 crore from its bank accounts.
Justice SG Pandit reserved the verdict on a petition filed by Xiaomi challenging an order by the Enforcement Directorate for alleged violation of provisions of the Foreign Exchange Management Act (FEMA).
The counsel for Xiaomi argued that the technology royalty payment made by Xiaomi to three companies outside India was not a violation of Section 4 of the FEMA Act.
Further, it was contended that the payments were deemed to be lawful by the Income tax department.
The royalty payments made by the company in 2015-16 were made through authorised dealers and there was no evidence of Xiaomi possessing foreign exchange outside India.
Hence, the order passed by ED using its power under Section 37 of the FEMA act was unjustified.
The seizure of bank accounts of the company by ED was disrupting business and preventing the company from paying wages and salaries to the individuals.
Further, it was stated that the company was constrained to approach the High court since the appellate tribunal under the act was not functional due to lack of personnel.
The court stayed the order of ED on May 5, 2022 under the condition that the account would be used for meeting expenses for the day-to-day activities of the company.
Any payment in the form of royalty or any other form to companies outside India is not permitted.