Karnataka Supreme Court allows Xiaomi to be overdrawn on payments, limits the payment of royalties

A big relief for the big tech giant Xiaomi Indiathe Supreme Court of Karnataka has allowed to take overdrafts from banks and make payments. However, the court has ruled out the payment of technology royalty.



Vacation Judge Justice S. Sunil Dutt Yadav also extended the interim measure on Thursday until May 23, stating that the matter is now between the banks and the petitioner company.

The court had granted a conditional reprieve on the order issued on April 29 by the Enforcement Directorate (ED) to seize as much as Rs 5,513.3 crore. The emergency department has taken the step after an appeal to the Foreign Exchange Management Act1999.

Senior attorney S. Ganeshan argued that: Xiaomi India was targeted because it is a Chinese company and other companies are allowed to pay technology royalties. Seeking clarification on the previous May 5 preliminary injunction, he argued that banks will not allow Xiaomi to transfer money in foreign currency for importation after the court order.

He explained that the company has to make payments to foreign companies in connection with the production and marketing of smartphones.

This challenging additional Solicitor General MB Nargund said authorities have no complaints if Xiaomi agrees to keep the seized amount in the bank and use the remaining amount.

He informed the court that on April 24 and 29, before the ED issued the order to seize Xiaomi’s bank accounts, according to the available information, about Rs 1,500 crore had been transferred from the company’s bank accounts.

However, Xiaomi insists that royalty payments to three companies abroad do not violate FEMA law. The company further claimed that the IT department itself had allowed it as a value-added activity.

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