In a significant development, the Karnataka High Court has instructed Google India and three of its senior executives to furnish bank guarantees amounting to 50% of the total fine imposed on them for alleged breaches under the Foreign Exchange Management Act (FEMA).
The Enforcement Directorate (ED) had earlier slapped a fine of ₹5 crore on Google India, along with an additional ₹45 lakh on three top officials. These penalties relate to suspected violations of Section 6(3)(d) of FEMA, involving transactions reportedly worth ₹364 crore.
As per the ED’s findings, the payments made by Google India to Google Ireland for distributor services, and to Google US for acquiring equipment, remained unsettled for extended periods. Specifically, ₹363 crore owed to Google Ireland remained unpaid until May 2014—more than four years later. A further ₹1 crore owed to Google US for equipment stayed pending for over seven years until January 2014.
The ED has classified these delayed payments as external commercial borrowings, which would have necessitated prior clearance from the Reserve Bank of India (RBI).
Google India, however, denied any wrongdoing, stating that these were not loans and hence didn’t require RBI approval. The company argued that no interest was charged, no repayment agreements existed, and the transactions followed guidelines from an RBI circular issued in July 2014.
Previously, in January 2019, the Appellate Tribunal for FEMA had temporarily stayed the penalties, citing merit in Google India’s appeal. However, the ED contested this decision through a second appeal.
The High Court has now directed submission of the bank guarantees within a fortnight.
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