Karnataka High Court Orders Google India to Pay Penalties Amid FEMA Violations

Court Directs Google India to Secure Penalties

Bengaluru: The Karnataka High Court has mandated that Google India and three of its senior executives must deposit 50% of the fines imposed due to alleged violations of the Foreign Exchange Management Act (FEMA) in the form of bank guarantees.

Previously, the Enforcement Directorate (ED) had imposed a fine of ₹5 crore on Google India, along with an additional ₹45 lakh on the three executives involved.

This case revolves around alleged breaches of section 6(3)(d) of FEMA, concerning transactions totaling ₹364 crore.

The ED claims these violations stem from payments made by Google India to Google Ireland for distributor fees and for purchasing equipment from Google US.

According to the ED, ₹363 crore owed to Google Ireland was unpaid for over four years until May 2014, while a payment of ₹1 crore for equipment from Google US remained unsettled for more than seven years until January 2014.

The agency categorized these transactions as commercial loans, which necessitate prior approval from the Reserve Bank of India (RBI).

In response, Google India has disputed these claims, stating that the transactions were not foreign exchange borrowings.

The company highlighted the absence of loan agreements, deferred payments, or interest, asserting compliance with an RBI circular issued on July 1, 2014.

Earlier, on January 11, 2019, the Appellate Tribunal for FEMA in Delhi had temporarily halted the penalties, indicating that Google India's appeal seemed to have merit. The ED later filed second appeals against this stay.

A division bench, consisting of Justices V Kameshwar Rao and S Rachaiah, noted that the tribunal's stay was based solely on an initial assessment.

They have now ordered Google India and the relevant officials to arrange bank guarantees for half of the total penalties within a two-week timeframe.