Xiaomi had filed an appeal in the High Court against the constitutional validity of Section 37A of the Foreign Exchange Management Act (FEMA) under which the ED had passed the award. A single judge bench had upheld the validity of the section in April.
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The company filed a writ appeal against the single-judge ruling in June this year before a division bench. It also filed a plea to pass an interim order allowing it to draw funds from its frozen accounts to continue its day-to-day business.
The tech firm also reiterated before the division bench that Section 37A of FEMA was unconstitutional, saying that it gives unbridled and unfettered power to authorities to freeze company accounts on mere suspicion without reasonable proof. Earlier, the company had argued before the single judge bench that it was being unfairly targeted because it was Chinese.
Section 37A of FEMA gives the competent authority the power to seize in India the assets equivalent to any foreign exchange, foreign security or any immovable property held outside India in violation of the act. In April 2022, ED had alleged that Xiaomi had sent foreign currency equivalent to Rs 5,551.27 crore to three foreign entities, which include one Xiaomi group entity, in the guise of royalties in violation of FEMA.
