BENGALURU, 15 APRIL

The Karnataka High Court has directed Google India and three of its senior executives to furnish bank guarantees amounting to 50 per cent of the penalties imposed on them by the Enforcement Directorate (ED) for alleged violations of the Foreign Exchange Management Act (FEMA).

The ED had levied a penalty of Rs 5 crore on Google India and an additional Rs 45 lakh collectively on the executives. The case involves alleged breaches of Section 6(3)(d) of FEMA, concerning transactions worth Rs 364 crore. According to the ED, Google India made payments to Google Ireland as distributor fees and to Google US for equipment purchases, which were not settled for several years. The ED claims these unpaid sums—Rs 363 crore to Google Ireland and Rs 1 crore to Google US—constituted commercial loans requiring prior approval from the Reserve Bank of India (RBI).

Google India has contested these allegations, arguing that the transactions did not qualify as foreign exchange borrowings. The company asserted there were no loan agreements, deferred payments, or interest components, and it complied with an RBI circular dated 1 July 2014.

In January 2019, the Appellate Tribunal for FEMA had granted a stay on the penalties, noting that Google India’s appeal appeared to hold merit. However, the High Court has now ruled that the stay was only a preliminary view and ordered the bank guarantees to be submitted within two weeks.