The Karnataka High Court has recently directed Google India and three of its senior executives to deposit 50 percent of the total penalties imposed on them, in the form of bank guarantees.
This action is related to alleged violations of the Foreign Exchange Management Act (FEMA). Earlier, the Enforcement Directorate (ED) had imposed a fine of Rs 5 crore on Google India and an additional Rs 45 lakh on the three company officials, making the total penalty amount Rs 5.45 crore.
The case revolves around certain foreign transactions made by Google India. According to the ED, the company had delayed payments amounting to Rs 364 crore without proper approvals from the Reserve Bank of India (RBI).
This includes a payment of Rs 363 crore to Google Ireland as distributor fees, which was reportedly delayed by over four years and paid only in May 2014. Additionally, a payment of Rs 1 crore for equipment sourced from Google US remained unsettled for over seven years, until January 2014.
The ED argued that these delayed payments should be treated as commercial loans, which under FEMA rules, require prior RBI approval.
However, Google India has strongly denied these allegations. The company has maintained that the transactions were not loans and therefore did not need RBI approval.
It stated that there were no loan agreements, no deferred payments, and no interest involved in these transactions. Google India also highlighted that they had followed the guidelines outlined in an RBI circular issued on July 1, 2014.
Earlier in 2019, the Appellate Tribunal for FEMA in Delhi had stayed the penalty imposed by the ED, suggesting that Google India’s appeal had merit. The ED, however, challenged this stay by filing a second appeal.
In response, a division bench of the Karnataka High Court, consisting of Justices V Kameshwar Rao and S Rachaiah, noted that the earlier stay was based only on an initial assessment. As a result, they have now ordered Google India and the three officials to submit bank guarantees for half the penalty amount within two weeks, while the case continues to be heard.
