LI Network
Published on: November 21, 2023 at 03:48 IST
Chinese tech giant Xiaomi has contested the seizure of ₹5,500 crore from its India bank accounts under Section 37A of the Foreign Exchange Management Act (FEMA) before the Karnataka High Court.
Xiaomi’s senior counsel, KG Raghavan, argued that the massive sum was confiscated without any disclosed reason for the necessity of such action.
Raghavan asserted that Section 37A of FEMA, which grants authorities the power to seize property, is manifestly arbitrary as it lacks guidelines on how and when to exercise these powers. He highlighted the absence of safeguards compared to other statutes that govern property seizure.
The senior lawyer emphasized the need for independent and weighty reasons for the exercise of seizure powers under Section 37A, emphasizing that the statute fails to provide such guidance. Raghavan questioned the lack of transparency in the process and expressed concern over the substantial financial impact on Xiaomi’s operations in the country.
Xiaomi’s legal challenge stems from an appeal against a single-judge order upholding the constitutional validity of Section 37A, FEMA, in response to an Enforcement Directorate (ED) order seizing ₹5,551.27 crore from Xiaomi’s bank accounts.
The Central government and ED have also filed an appeal, contending that the single-judge order failed to ensure Xiaomi maintains the disputed funds in their accounts, leading to the utilization of 30% of these funds by the company. Raghavan argued that all transactions cited by authorities to justify the seizure were legitimate and questioned the frequent use of Section 37A powers.
The court session concluded with the matter adjourned until December 12, expecting Raghavan to conclude his arguments.
Case Title: Xiaomi India v. Enforcement Directorate