The High Court of Karnataka has upheld constitutional validity of Section 37A of the Foreign Exchange Management Act (FEMA), 1999, which empowers the Enforcement Directorate (ED) to seize in India assets equivalent to any foreign exchange, foreign security or any immovable property held outside India in violation of FEMA.
Justice M. Nagaprasanna delivered the judgment while rejecting the petition filed by Xiaomi Technology India Pvt. Ltd. The judgment, which was pronounced on April 21, was released on May 30.
The company had questioned the constitutional validity of Section 37A while challenging the ED’s April 2022 action of seizing ₹5,551.27 crore lying in company’s bank accounts. The ED had seized the amount on the allegation that the company had sent foreign currency equivalent to ₹5,551.27 crore to three foreign–based entities, which include one Xiaomi group entity, in the guise of royalties in violation of FEMA.
