A Division Bench of the High Court of Karnataka on Wednesday ordered the issue of notice to the Central government on an appeal filed by Xiaomi Technology India Pvt. Ltd. challenging the single judge verdict upholding the constitutional validity of Section 37A of the Foreign Exchange Management Act (FEMA), 1999.
The Bench comprising Chief Justice Prasanna B. Varale and Justice M.G.S. Kamal, which heard preliminary submissions on the appeal, adjourned further hearing till July 11.
The single judge on April 21 rejected the company’s contention and said that Section 37A, 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, is constitutionally valid.
The company had questioned the constitutionality of Section 37A while challenging the ED’s April 2022 action of seizing ₹5,551.27 crore from its bank accounts 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.
The single judge had given liberty to the company to file an appeal before the Appellate Tribunal under Section 37A(5) of FEMA challenging the seizure order passed by the competent authority.
