ReutersThe Karnataka High Court on Thursday refused to pass an interim stay on the September 19 competent authority order confirming the Enforcement Directorate's seizure of over Rs 5,500 crore of Xiaomi India's bank assets for forex violations.
A vacation bench of Justice Sanjay Gowda asked the company to furnish a bank guarantee of ?5,551.27 crore, the amount the company allegedly remitted abroad, if it wanted the court to pass an interim order.
Xiaomi India had filed a writ petition challenging the constitutionality of the confirmation order passed by the competent authority appointed under Foreign Exchange Management Act, 1999 (FEMA), ET reported on Wednesday. The competent authority has held that the ED was right in attaching the company's assets, stating that the said amount was transferred abroad in an unauthorised manner and is held on behalf of the group entity in contravention to FEMA provisions.
Thursday, the deputy solicitor general, M B Nargund, appearing for ED, argued that that the company has misused the previous interim order by making payments to foreign entities for importing items essential to its manufacturing and sales of smartphone, and the same will be proved in an affidavit.
Nargund argued the company now has ?3,956 crore in its bank accounts, down from over ?7,000 crore it had when the ED's seizure order was passed.
The bench said the seizure order then should apply for the sum present in the company's account, and the remaining amount should be furnished as bank guarantee. The court has set October 14 for the next hearing.
Earlier in April, the high court has stayed the Enforcement Directorate from attaching Xiaomi's assets in the interim, allowing the company to operate its day-to-day business with the exclusion of royalty payments through bank overdraft.
The company will also be challenging the order before the appellate tribunal empowered under FEMA later.
Xiaomi India has maintained its royalty payments are in line with industry standards and that 84% of the attached amount has been paid to the Qualcomm group, while the rest was paid to its parent group in China. The royalty payments were made to avail in-licensed technologies including standard essential patents without which no Xiaomi smartphone would function in India.
A vacation bench of Justice Sanjay Gowda asked the company to furnish a bank guarantee of ?5,551.27 crore, the amount the company allegedly remitted abroad, if it wanted the court to pass an interim order.
Xiaomi India had filed a writ petition challenging the constitutionality of the confirmation order passed by the competent authority appointed under Foreign Exchange Management Act, 1999 (FEMA), ET reported on Wednesday. The competent authority has held that the ED was right in attaching the company's assets, stating that the said amount was transferred abroad in an unauthorised manner and is held on behalf of the group entity in contravention to FEMA provisions.
Thursday, the deputy solicitor general, M B Nargund, appearing for ED, argued that that the company has misused the previous interim order by making payments to foreign entities for importing items essential to its manufacturing and sales of smartphone, and the same will be proved in an affidavit.
Nargund argued the company now has ?3,956 crore in its bank accounts, down from over ?7,000 crore it had when the ED's seizure order was passed.
The bench said the seizure order then should apply for the sum present in the company's account, and the remaining amount should be furnished as bank guarantee. The court has set October 14 for the next hearing.
Earlier in April, the high court has stayed the Enforcement Directorate from attaching Xiaomi's assets in the interim, allowing the company to operate its day-to-day business with the exclusion of royalty payments through bank overdraft.
The company will also be challenging the order before the appellate tribunal empowered under FEMA later.
Xiaomi India has maintained its royalty payments are in line with industry standards and that 84% of the attached amount has been paid to the Qualcomm group, while the rest was paid to its parent group in China. The royalty payments were made to avail in-licensed technologies including standard essential patents without which no Xiaomi smartphone would function in India.
( Originally published on Oct 06, 2022 )
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