₹5.5k crore seized under FEMA, but no word on why it was necessary: Xiaomi to Karnataka High Court

While ₹5,500 crore has been seized from the bank accounts of Xiaomi India, there is no whisper as to why such seizure under Section 37A of the Foreign Exchange Management Act (FEMA) was necessary, the Chinese tech company argued before the Karnataka High Court on Monday..Senior Advocate KG Raghavan, who represented Xiaomi, asserted further that Section 37A of the FEMA was arbitrary, as it conferred unbridled powers on the authorities to seize property, without any guidelines on how or when to exercise such powers. .Appearing before a Bench of Chief Justice PB Varale and Justice MGS Kamal, the senior lawyer pointed out that other statutes which confer powers to seize or provisionally attach property contain more safeguards that must be satisfied before a seizure or attachment order is passed. On the other hand, Section 37A of the FEMA does not contain any guideline on when it would be necessary to pass a seizure order.While Section 37A is triggered by a violation of Section 4 of the FEMA, the must also be independent and weighty reasons for exercising seizure powers under Section 37A, Raghavan added. "It is left to the whims and fancies of the authorities...Why should power be exercised under Section 37A? - Nothing mentioned. There should be independent, weighty reasons for exercise of powers under Section 37A...₹5,000 crores of money in my account has been attached. How are they going to reverse it? I am not able to do business in this country.".The Court was hearing an appeal by Xiaomi India challenging an April 21 order of a single-judge who had upheld the constitutional validity of Section 37A, FEMA. This decision was rendered on a plea by Xiaomi challenging an order of the Enforcement Directorate (ED) seizing ₹5,551.27 crore from its bank accounts. .Meanwhile, the Central government and the Enforcement Directorate (ED) have also moved an appeal before the Karnataka High Court to effect the seizure of ₹5,551.27 crore from the bank accounts of Xiaomi. They argued that in the April 21 order, the single-judge failed to pass any orders to ensure that Xiaomi maintains the disputed funds in their bank accounts. Thirty percent of these funds have now been used by the company as a result, the government claimed. .Raghavan submitted on Monday that all of the transactions cited by the authorities while ordering the seizure of Xiaomi's accounts under Section 37A of the FEMA were legitimate transactions and did not attract any violation of Section 4. "Nothing has been done in a hush-hush manner," Raghavan argued. He added that in any case, there was "not a whisper" as to why the drastic step attaching Xiaomi's bank accounts was taken by the authorities. .He also questioned whether Section 37A powers can be invoked in every case where an alleged violation of Section 4 (dealing with conditions to hold foreign exchange) of the FEMA has been suspected. "When you put that question, our answer is, it may happen. It is possible," the Chief Justice mused, in reply. Raghavan, however, maintained that Section 37A cannot be so invoked, particularly since it does not have any safeguards to guide its application. "Even in a serious statute like the PMLA, which has international ramifications, which has been upheld by the Supreme Court - even that statute has safeguards," he added..The matter will be heard next on December 12, when Raghavan is expected to conclude his arguments. .[Read live account of hearing]