ORDER

The petitioner-Xiaomi Technology India Private Limited (hereinafter referred to as ‘the Company’ for short) has knocked at the doors of this Court questioning the constitutional validity of Section 37A of the Foreign Exchange Management Act, 1999 (‘the Act’ for short) and has sought certain consequential prayers of quashment of seizure order under Section 37A(1) and confirmation order of such seizure under Section 37A(3) of the Act.

2. Shorn of unnecessary details, facts germane to be noticed are as follows:-

The petitioner claims to be a Private Limited Company incorporated under the provisions of the Companies Act, 2013 and it further claims that the Board of Directors of the petitioner/ Company is constituted only of Indian citizens. More than 1500 employees and around 50,000 Indian families are directly or indirectly dependent on the business of the petitioner who, as claimed by the petitioner, are Indian citizens. The petitioner gets incorporated as a Private Limited Company on 7-10-2014 as a subsidiary of Xiaomi Singapore Private Limited and Xiaomi H.K. Limited and is engaged in the business of procurement, supply and distribution of Xiaomi products in India which is popularly referred to as ‘MI’. The business of the petitioner includes mobile phones, smart phones, mobile phone accessories and peripherals, smart watches, televisions, network component devices, laptops, computers, television accessories and the list goes on. The petitioner operates as a re-seller/distributor of mobile phones and related products in India. It is mainly in the distribution segment.

3. The petitioner claims to be purchasing locally manufactured smart phones for re-sale from third party Indian manufacturers, import spare parts, accessories, mobile phones and other products from its group entities viz., Xiaomi H.K. Limited and Zhuhai Xiaomi Communication Company Limited. The petitioner claims to be the largest smart phone brand in India having 1,500 employees working under it. The petitioner claims to be regularly filing its income tax returns and is assessed to income tax even up to 2018- 19 and the petitioner in addition to paying income tax is also subjected to investigation by Customs Department and other entities. This does not concern the petition.

4. In the month of February, 2022 the petitioner claims to have become aware of summons dated 4-01-2022 addressed to one Mr. Nitin Ajage in the office of the petitioner. The summons was issued under Section 37(1) and 37(3) of the Act read with Section 131 (1) of the Income Tax Act, 1961. The petitioner claims that the summons came to the attention of the petitioner Company around February 2022 and due to third wave of COVID-19, no further steps were taken to take the summons forward. The 3rd respondent/Assistant Director, Directorate of Enforcement issues second summons on 25-02-2022 again on one Mr. Manu Jain who is said to have resigned from the Company and finally the Company had to comply with the submission of documents as was sought by the Directorate of Enforcement which was done by 08th March, 2022.

5. The 2nd respondent/Directorate of Enforcement initiated investigation against the petitioner following the inputs from the Income Tax Department relating to certain remittances of royalty made by the petitioner to certain foreign entities viz., (i) Qualcomm Inc. and Qualcomm Tech Inc. and (ii) Beijing Xiaomi Mobile Software Company Limited. The royalty that is paid to Qualcomm Inc. Qualcomm Tech Inc., USA and Beijing Xiaomi Mobile Software Company Limited forms the fulcrum of the present lis. Qualcomm Inc. and Qualcomm Technologies Inc. (referred to as “Qualcomm” for short) are the leading wireless technology innovators including code division multiple access technology. Qualcomm has developed certain valuable leading intellectual property across a number of areas which are foundational to mobile experiences.

6. The petitioner claims to be the beneficiary of Qualcomm’s proprietary and