Karnataka High Court upholds ED seizure of Genpact’s Gurugram office

Bengaluru: Karnataka High Court upheld Enforcement Directorate’s (ED) seizure of Genpact India’s head office in Gurugram. But it cancelled ED’s refusal to let Genpact invest $100 million in its GIFT City company because ED gave no reasons for saying no. ED must now decide again and explain its decision.Justice Suraj Govindaraj issued the order on Sept 16 based on two petitions filed by Genpact India.ED seized the Gurugram property on Feb 3 under Section 37A of Foreign Exchange Management Act (FEMA). The action is linked to a 2015 deal in which Genpact group companies borrowed about $737.5 million abroad and brought the money into India through debentures, a type of loan. ED says the money was quickly sent back out, leaving the Indian company with the debt. The company repaid it between 2018 and 2023.Genpact argued that the deals were completed in 2015, before Section 37A came into force in Sept that year. It also said tax and other authorities had already reviewed them.The court agreed with Genpact on one point. It said the law cannot be applied to old deals just because their effects continued. But it said payments made after the law came into force can be examined, and that ED had enough material to act.Genpact can keep working from the building. But it cannot sell, mortgage or transfer it. An email sent to Genpact didn’t elicit a response till press time.Companies under investigation need a no-objection certificate (NOC) from ED before investing abroad. Genpact applied for one to put $100 million into a new treasury centre in GIFT City. ED rejected the request on Jan 13, without giving any reason.The court said this was not enough. It held that a pending investigation alone cannot be a ground to refuse an NOC. ED must give clear reasons linked to the investment. It does not have to reveal sensitive details, but it must share the main ground for its decision.The court also said ED had reason to look closely at the plan, since the new company would lend money to Genpact firms outside India.The case now goes back to ED. Genpact has 10 days to submit its documents. ED must then decide within 10 days and give its reasons in writing. The regulator must also consider extending the deadline for making the investment. Genpact cannot invest until it gets the NOC. An email sent to Genpact did not elicit a response till press time.Get the latest Business News and Live updates. Download the TOI app.