NEW DELHI: In a blow to Chinese smartphone-maker Xiaomi, the Karnataka high court on Friday rejected its writ petition challenging seizers of Rs 5,500 crore by the Enforcement Directorate (ED).
Last year, ED accused the company of violating foreign exchange rules by parking money abroad under the guise of royalties and froze Rs 5,551 crore worth of Xiaomi assets. The agency said it was remitting foreign currency equivalent to Rs 5,551.27 crore to three entities - one Xiaomi Group firm and two US-based unrelated entities in the guise of royalty. However, the firm denies any wrongdoing.
A single judge bench of Justice M Nagaprasanna dismissed the petition on merits while upholding the maintainability of the petition. The court noted that Xiaomi India’s challenge to the constitutional validity is not maintainable on grounds that it is violative of article 14 of the constitution, since article 14 is person-centric. “We are studying the matter and waiting for the written order. We’d like to reiterate that our operations in India are compliant with all local laws and regulations,” said a spokesperson of Xiaomi India.
The court said a petitioner need not be a citizen to challenge the fulcrum of Article 14, which gives a person the right to equality and equal protection before the law, the court observed. However, the court upheld the constitutional validity of section 37A of the Foreign Exchange Management Act (FEMA), observing the section does not suffer from manifest arbitrariness. It granted the firm the option to appeal under section 37A (5) of the act.