Karnataka HC directs Google India to submit 50% FEMA penalty as bank guarantee

NEW DELHI: The Karnataka High Court has directed Google India and three of its senior executives to deposit 50 percent of the penalties imposed, for alleged Foreign Exchange Management Act (FEMA) violations, as bank guarantees.
The Enforcement Directorate (ED) previously imposed a Rs 5 crore penalty on Google India and Rs 45 lakh collectively on three officials.
The investigation concerned alleged breaches of FEMA section 6(3)(d), involving Rs 364 crore worth of transactions.
The ED stated that the infractions were related to Google India's payments to Google Ireland for distributor fees and equipment purchases from Google US.
According to the agency, Rs 363 crore owed to Google Ireland remained outstanding for over four years until May 2014, whilst Rs 1 crore for equipment from Google US stayed unpaid for more than seven years until January 2014.
These transactions were categorised as commercial loans by the ED, requiring prior RBI authorisation.
Google India disputed these claims, stating that the transactions were not foreign exchange borrowings.
The organisation stated there were no loan agreements, delayed payments, or interest charges, and cited compliance with an RBI circular dated July 1, 2014.
The Appellate Tribunal for FEMA in Delhi had previously suspended the penalties on January 11, 2019, noting that Google India's appeal showed promise.
The ED later filed second appeals against this suspension.
Justices V Kameshwar Rao and S Rachaiah, forming a division bench, noted that the tribunal's stay was based on an initial assessment.
They have directed Google India and the relevant officials to submit bank guarantees for 50% of the total penalties within a fortnight.