Karnataka High Court orders Google India to furnish bank guarantees over FEMA penalty

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

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The case stems from a Rs 5 crore penalty levied on Google India and a combined Rs 45 lakh on three officials over purported FEMA breaches involving transactions worth Rs 364 crore. The ED contended that Google India made payments to Google Ireland for distributor services and also procured equipment from Google US without securing prior authorization from the Reserve Bank of India, as required under FEMA Section 6(3)(d).

Google India contested the ED’s interpretation, asserting that the payments were not foreign exchange borrowings and did not involve loan agreements or delayed payments. The company also referenced compliance with an RBI circular from July 2014.

Earlier, the Appellate Tribunal for FEMA had stayed the penalties, finding merit in Google India’s appeal. However, the ED challenged this stay through second appeals. The High Court has now mandated the bank guarantees be submitted within two weeks.