Court holds Section 37A seizure over Genpact’s 2015 cross-border transactions maintainable, but directs fresh consideration of overseas investment approval under Rule 10
The Karnataka High Court has delivered a significant ruling in the Genpact India matter, dismissing the company’s challenge to an Enforcement Directorate seizure order under Section 37A of the Foreign Exchange Management Act, 1999 (FEMA), while partly allowing its separate plea against rejection of a No Objection Certificate (NOC) for a proposed overseas investment.
Justice Suraj Govindaraj held that the ED had sufficient material to form a “reason to believe” that the transactions involving Morgan Stanley borrowings, share acquisitions, and NCD issuances formed part of a connected financial arrangement warranting scrutiny under FEMA. The Court rejected the argument that Section 37A could not be invoked because the core transactions occurred in January and March 2015, before the provision came into force on 9 September 2015. However, the Court clarified that while Section 37A cannot be applied retrospectively to completed pre-2015 transactions, subsequent payments made between 2018 and 2023 towards the NCD liability could be taken into account as part of the overall arrangement.
The Court also refused to interfere with the seizure of Genpact’s head-office property in Gurgaon, though it said the seizure would not prevent the company from carrying on its lawful business operations from those premises. The company was restrained from creating third-party rights or otherwise dealing with the property inconsistently with the seizure order.
On the maintainability issue, the Court held that the writ petition against the seizure order was maintainable despite the alternate statutory remedy under FEMA, since the challenge raised jurisdictional questions. At the same time, it declined to decide the merits of the alleged contravention finally, leaving those issues to the Competent Authority under Section 37A(3).
In a separate but related petition, the Court set aside the ED’s communication dated 13 January 2026 rejecting Genpact India’s application for an NOC under Rule 10 of the Foreign Exchange Management (Overseas Investment) Rules, 2022. The company had sought permission to invest USD 100 million in a GIFT City subsidiary intended to function as a global treasury centre.
The Court found the rejection unsustainable because it was a bare, unreasoned communication that did not disclose the basis for refusal or explain the nexus between the pending ED investigation and the proposed investment. Citing principles of natural justice and fair administrative action, the Court held that mere pendency of an investigation is not enough to refuse an NOC. The matter was remitted to the competent authority for fresh consideration, with directions to pass a reasoned order within a time-bound period.
The Court also directed the concerned regulatory authority to consider extending the time available for the proposed investment, noting that the existing extension for the GIFT City entity was stated to expire on 15 September 2026.
Bottom Line :
FEMA - Section 37A seizure - Though Section 37A cannot be retrospectively applied to completed pre-09.09.2015 transactions, subsequent payments made between 2018 and 2023 pursuant to NCD liability could be considered for invoking Section 37A - Writ against seizure maintainable on jurisdictional grounds but dismissed - Rejection of NOC under Rule 10 of Foreign Exchange Management (Overseas Investment) Rules, 2022 without reasons held unsustainable and matter remitted for fresh consideration.
Statutory provision(s): Foreign Exchange Management Act, 1999 Section 4, Foreign Exchange Management Act, 1999 Section 37A, Foreign Exchange Management (Overseas Investment) Rules, 2022 Rule 10, Constitution of India Articles 226 and 227, Foreign Exchange Management Act, 1999 Section 6(3)(e)
