A single-judge bench of Justice S Sunil Dutt Yadav issued the order after Xiaomi India approached the court on Thursday for clarification of its order given on 5 May
File image of Karnataka High Court. WikimediaCommons
The Karnataka High Court Thursday allowed smartphone manufacturer Xiaomi Technology India Pvt Ltd to seek bank overdrafts to make payments for its operation, excluding a royalty of Rs 5,500 crore to foreign technology suppliers which was freezed by the Enforcement Directorate through an order issued on 29 April.
A single-judge bench of Justice S Sunil Dutt Yadav issued the order after Xiaomi India approached the court on Thursday for clarification of its order given on 5 May.
Xiaomi told the court that after its 5 May order, banks blocked all payments of the company, including daily payments for buying of ancillary items for manufacturing.
Advocates representing Xiaomi argued that the company should be allowed to utilise Rs 1,000 crore of funds in its bank accounts that have been freezed. The ED lawyers opposed the move and argued that the smartphone make has already moved out Rs 2,500 crore from India as royalty for foreign technology suppliers ahead of 29 April order for a freeze of the company’s account.
The counsel for Xiaomi said on Thursday argued that the company was being targeted for being Chinese. “I am the number one seller of smartphones in the country at 25 per cent (market share). Unfortunately, I am saying this with prejudice to the other side, I am Chinese,” he advocate told the court.
The additional solicitor general appearing for the ED countered the argument saying Xiaomi has been a Chinese firm since 2014 and that no action was taken against it previously. He said, “Rs 1,500 crore had been transferred in one stroke” by the firm at the end of April.
The High Court on Thursday said its decision to stay the order, and also enabling Xiaomi to access the funds for non-royalty uses, would continue. The next hearing has been set for 23 May.
Earlier in May, Xiaomi Technology India Private Limited approached the Karnataka High Court stating that technology royalty paid to three foreign companies was not in contravention of the Foreign Exchange Management Act (FEMA).
The smartphone manufacturer also argued that the payments were found to be legal by the Income Tax Department and were made from the 2015-16 period. Xiaomi also emphasised that there was no evidence to show that it is holding foreign exchange outside India.
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