The Karnataka High Court has ordered Google India and three of its senior executives to deposit 50% of the penalties imposed on them for alleged violations of the Foreign Exchange Management Act (FEMA) in the form of bank guarantees.

The directive comes in connection with a case initiated by the Enforcement Directorate (ED), which had earlier imposed a ₹5 crore penalty on Google India and an additional ₹45 lakh on the three company officials.

The matter relates to alleged violations under Section 6(3)(d) of FEMA, involving transactions amounting to ₹364 crore. According to the ED, these transactions included distributor fees paid by Google India to Google Ireland and the acquisition of equipment from Google US.

The agency claims that ₹363 crore owed to Google Ireland remained unpaid for over four years until May 2014, while a payment of ₹1 crore for equipment purchased from Google US was delayed for more than seven years until January 2014.

The ED has classified these transactions as commercial loans, which under FEMA regulations, require prior approval from the Reserve Bank of India (RBI).

Google India has strongly contested the charges, maintaining that the transactions were not foreign exchange borrowings. The company argues that there were no loan agreements, deferred payments, or interest components involved, and that it had complied with the provisions of an RBI circular dated July 1, 2014.

Previously, on January 11, 2019, the Appellate Tribunal for FEMA in Delhi had granted a stay on the penalties, observing that Google India's appeal appeared to be prima facie valid. The ED later challenged this decision by filing second appeals.

A division bench of Justices V. Kameshwar Rao and S. Rachaiah noted that the tribunal’s stay was granted based only on a preliminary assessment. The bench has now directed Google India and the three executives to furnish bank guarantees covering 50% of the penalties within two weeks.