The Karnataka High Court has upheld the Enforcement Directorate's (ED) seizure of Genpact India's Gurugram head office in the ₹7,635.9 crore money routing case. According to the latest judgment delivered on September 16 by Justice Suraj Govindaraj, the court vacated its interim stay on the seizure order issued in February 2026, but clarified that Genpact can continue its business operations from the property. The court emphasized that while the ED can seize the property, the seizure shall not prevent Genpact from continuing its lawful business operations from the premises. However, the company cannot transfer, pledge or create third-party rights over the property during the seizure period. The state's high court said the order contained sufficient material for the ED officer to form a preliminary belief under Section 37A of the Foreign Exchange Management Act (FEMA). Amit Maheshwari, Managing Partner at AKM Global, noted that the merger of Empower and Genpact India could not withstand ED's scrutiny for Section 4 of FEMA contravention, leaving Genpact to pursue its rights and contentions before the competent authority. The ED was represented by Additional Solicitor General N. Venkataraman and other counsel, including Senior Advocate Madhu N. Rao.
According to the latest court judgment, the case centers on a series of transactions completed in March 2015 involving Genpact Bermuda, which borrowed USD 737.5 million from Morgan Stanley. The money was routed through Genpact Luxembourg, which subscribed to 4,600 non-convertible debentures of Empower India, valued at around ₹4,600 crore. The entire ₹4,600 crore was transferred by Empower India on the same day towards acquisition of the remaining 51% stake in Genpact India. The funds then moved to Genpact Singapore and subsequently to Genpact Bermuda, which used it to repay the Morgan Stanley loan. The ED alleged that these were not independent commercial transactions but successive steps forming part of an integrated funding arrangement. The agency argued that between 2018 and 2023, about ₹7,635.9 crore was paid by Genpact India to Genpact Luxembourg towards repayment of the NCD principal and interest, resulting in the movement of substantial amounts of the Indian company's free reserves to the foreign group entity. The court held that the ED was entitled to examine the transactions as a connected arrangement rather than looking at each transaction in isolation. The ED argued that the transactions formed part of a connected arrangement and amounted to a circular movement of funds, which the court accepted as valid grounds for investigation.
The case relates to a series of transactions involving loans granted by Morgan Stanley worth $737.5 million to Genpact entities in Bermuda, Luxembourg, and Singapore more than a decade ago. As reported by the latest court judgment, the ED alleged that these transactions were interconnected steps in an arrangement through which funds moved into India and were subsequently transferred back to an overseas Genpact entity. The agency specifically alleged that between 2018 and 2023, about ₹7,635.9 crore was paid by Genpact India to Genpact Luxembourg towards repayment of the NCD principal and interest, resulting in the movement of substantial amounts of the Indian company's free reserves to the foreign group entity. The ED has claimed that the transactions amounted to round-tripping and violated Section 4 of FEMA, which restricts Indian residents from holding foreign exchange, securities or assets outside India. This is the latest development in the long-standing case of the US-based BPM firm's consolidation of its Indian operations through Empower Research Knowledge Services. According to the ED, Empower Research Knowledge Services, an entity with a net valuation of around ₹66 crore received ₹4,528.25 crore as Foreign Direct Investment (FDI) from Headstrong Consulting Singapore on January 28, 2015, under the declared purpose of market research. The agency alleged that the company routed the entire proceeds back to overseas entities to acquire a 49% stake in the then Genpact India without obtaining the required approvals from the RBI.
Genpact argued that the transactions formed part of a business reorganisation and did not constitute round-tripping. According to the court judgment, the company also argued that the seizure of its head office was disproportionate to the objectives ED wanted to achieve. However, the court rejected these arguments, stating that the connected sequence of transactions, the movement of funds, the immediate onward transfer of the NCD proceeds, and the financial position of Empower India provide sufficient material for the exercise of jurisdiction under Section 37A of the Foreign Exchange Management Act. The court said tax and FEMA proceedings dealt with different questions and that the tax rulings did not automatically invalidate the ED's inquiry. As noted by AKM Global's Amit Maheshwari, "The connected sequence of transactions, the movement of funds, the immediate onward transfer of the NCD proceeds, the financial position of Empower India and the subsequent discharge of the NCD liability provide sufficient material for the exercise of jurisdiction under Section 37A." The court also rejected the argument that Section 37A was being applied retrospectively, holding that while transactions completed in January and March 2015 could not themselves be subjected retrospectively to Section 37A, subsequent payments made between 2018 and 2023 could be considered if they formed part of the arrangement under investigation. The court said at this stage, it is not called upon to determine whether there is a contravention of FEMA, adding that the issue would have to be decided by the competent authority under Section 37A. The ED's investigation revealed that the Group has made an 'integrated, multilayered fraudulent scheme disguised as internal corporate restructuring and legitimate debt financing to systematically siphon foreign exchange out of India out of the reserves and surplus of the Indian entity'.
The court quashed the ED's refusal to grant Genpact a no-objection certificate (NOC) to remit $100 million overseas, stating that the refusal lacked adequate reasons and failed to establish a clear link between the investigation and the proposed investment. As reported by the latest court judgment, the court set aside the ED's January 13, 2026 refusal of the NOC, holding that the order did not disclose adequate reasons or establish a clear connection between the pending investigation and the proposed overseas investment. Any refusal must be based on relevant, rational, and disclosed reasons, said the court. The NOC application was sent back for a fresh, reasoned decision within 10 days of Genpact submitting the required material, with the regulator also asked to consider extending the investment deadline which had expired on September 15, 2026. The court observed that the transactions cannot be viewed only as isolated borrowings, share acquisitions, or independent NCD investment, but must be considered as part of a connected sequence of transactions that constitute a contravention under the Foreign Exchange Management Act. Amit Maheshwari, managing partner at AKM Global, noted that the merger of Empower and Genpact India could not withstand the ED's scrutiny, leaving Genpact to agitate its rights and contentions before the Competent Authority. The judgment does not amount to a final finding that Genpact violated FEMA, as the court clarified that it was not deciding at this stage whether Genpact had ultimately violated FEMA, with that question being left to the competent authority under Section 37A. The court also set aside the ED's rejection of Genpact's application for a no-objection certificate for a proposed USD 100 million investment in its GIFT City entity, directing the competent authority to reconsider the application and issue a reasoned order.
