Karnataka High Court backs ED seizure of Genpact office but permits business operations

In a September 16 order, the Karnataka High Court affirmed the Enforcement Directorate’s authority to seize the premises of Genpact’s Indian head office in Gurugram, while explicitly stating that the seizure cannot impede the company’s ordinary operations at the location. The ruling also overturned the ED’s refusal to grant Genpact a No-Objection Certificate for a proposed $100 million investment in GIFT City, instructing a designated authority to issue a fresh decision within ten days of receiving all documents.

The dispute involves a series of transactions dating back more than a decade, including $737.5 million in loans from Morgan Stanley to Genpact entities in Bermuda, Luxembourg and Singapore, and payments of about ₹7,800 crore from Genpact India to its Luxembourg affiliate for non-convertible debenture repayments. The Enforcement Directorate alleges these moves constitute round-tripping that transferred Indian free reserves abroad, violating foreign-exchange rules.

Genpact contends the arrangements were part of a legitimate business reorganisation and that the seizure is disproportionate. The court held that the linked sequence of loans, share acquisitions and NCD proceeds provides sufficient basis for invoking FEMA Section 37A, and that the seized property’s value is not demonstrably excessive.