Karnataka HC Seeks 50% Bank Guarantee from Google India in FEMA Case

In a significant ruling, the Karnataka High Court directed Google India and three of its top executives to provide bank guarantees for 50% of the penalties levied by the Enforcement Directorate (ED) for presumed violations of the Foreign Exchange Management Act (FEMA). The ED had previously imposed a ₹5 crore penalty on Google India and a total of ₹45 lakh on the executives, based on discrepancies in transactions of ₹364 crore where payments were made to Google Ireland for distributor charges and equipment acquisition from Google US.

The ED labeled these delayed payments—₹363 crore to Google Ireland and ₹1 crore to Google US—as commercial loans, which need prior Reserve Bank of India approval. Google India refuted any wrongdoings, however, and said the transactions were not foreign exchange borrowings and that no loan agreements, deferred payments, or interest had been involved. The company also pointed to following an RBI circular issued in July 2014.

Earlier, the FEMA Appellate Tribunal in Delhi had granted a stay on the penalties, observing merit in Google India's appeal. But the ED appealed against this stay, prompting the High Court's latest order. The court has granted Google India and the executives two weeks to file the bank guarantees, subject to the outcome of their appeals.

Source: The Economic Times