Karnataka HC allows Xiaomi to access overdraft facilities from banks

The High Court of Karnataka has extended more relief to Chinese firm Xiaomi Technology India Pvt Ltd by allowing it to use overdraft facilities from banks for purposes other than paying royalties.

The company had sought to use Rs 1,000 crore for its day-to-day expenditure.

The order by the HC on Thursday came after the company approached it seeking clarification on an earlier order.

"It is clarified that petitioner is at liberty to take an overdraft and make payments from such an overdraft excluding royalty, it is a matter between it and the bank, the court said, clarifying its May 5 order.

The HC last week ordered a stay on the Enforcement Directorate's order freezing Rs 5,551 crore in the accounts of Xiaomi in India. Xiaomi approached the HC seeking clarification as the banks were not allowing it to use the funds for its day-to-day activities though the Court had allowed it.

On Thursday, Xiaomi's counsel submitted before the HC that it was being targeted for being a Chinese company. It was claimed that Xiaomi has 25 per cent share of the smartphones market in India and other companies with 75 per cent market share were also paying royalties for the last 12 years to the same foreign companies.

"There is no action against them because I am Chinese and they are not Chinese, that is the only restriction. They only want to wreak vengeance on China, that is the problem," the counsel alleged.

The ED sought directions from the court to reinstate the freeze on the accounts. The HC, however, extended its stay on the ED order and adjourned the hearing of the case to May 23.

The ED claims that Xiaomi had transferred Rs 2,500 crore to three foreign companies; two in the US and one in China as royalties earlier this year.

The vacation bench of the HC of Justice Siddappa Sunil Dutt Yadav in its order on Thursday said, "The interim order earlier granted is extended till next date."

The Additional Solicitor General M B Nargund informed the Court that an application for vacating of stay order will be filed during the course of the day.

The court however said that the "matter requires hearing so far as the further interim order sought by the petitioner. Due to paucity of time matter cannot be heard. Adjourned to May 23."

The ED ordered the freeze on the accounts of the company on April 29, 2022. It had claimed that the company had made illegal payments to foreign entities under the guise of royalties violating the Foreign Exchange Management Act (FEMA).