The Karnataka High Court has upheld the Enforcement Directorate’s (ED) seizure of Genpact India’s Gurugram head office in an alleged Rs 7,800-crore round-tripping case involving overseas group entities, while setting aside the agency’s rejection of the company’s application for a No Objection Certificate (NOC) for a proposed $100-million investment in GIFT City.
In an order dated September 16, the High Court dismissed Genpact India’s challenge to the seizure but directed the competent authority to reconsider its NOC application and pass a fresh, reasoned order. The court found sufficient material for the ED to form a preliminary belief under Section 37A of the Foreign Exchange Management Act (FEMA) to seize the property. Section 37 of FEMA gives the ED powers to investigate suspected foreign-exchange violations, including search and seizure.
What is ED’s case
The case relates to a series of transactions involving Morgan Stanley loans and Genpact entities in Bermuda, Luxembourg and Singapore. The ED alleged that the transactions were interconnected steps in an arrangement through which funds moved into India and were subsequently transferred back to an overseas Genpact entity.
According to the ED, a $737.5-million loan from Morgan Stanley to a Genpact entity in Bermuda was transferred to Genpact Luxembourg. The Luxembourg entity subsequently subscribed to 4,600 non-convertible debentures issued by Empower India, with each debenture having a face value of Rs 1 crore, aggregating Rs 4,600 crore.
Empower India then transferred the funds to Headstrong Singapore towards the acquisition of the remaining 51 percent stake in Genpact India. The funds were subsequently transferred back to Genpact Bermuda and used to repay the Morgan Stanley loan, according to the ED’s case.
The agency alleged that these were not independent commercial transactions but successive steps forming part of an integrated funding arrangement.
The ED further alleged that about Rs 7,800 crore, including principal and interest, was subsequently repaid to Genpact Luxembourg between 2018 and 2023 from the reserves of the Indian business. The agency treated the transactions as evidence of alleged round-tripping.
Genpact disputed the allegations
Genpact disputed the allegations and argued that the transactions formed part of a business reorganisation and did not constitute round-tripping. The company also argued that the original funding arrangement predated the introduction of Section 37A in September 2015. Section 37A allows the seizure of assets in India equivalent in value to assets allegedly held outside India in contravention of FEMA.
HC upholds ED’s case
The High Court, however, held that the original arrangement prior to Section 37A did not by itself invalidate the ED proceedings because the agency was also relying on subsequent payments and actions between 2018 and 2023.
The HC order stated: “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.”
Amit Maheshwari, Managing Partner at AKM Global, a tax and consulting firm, said: “The merger of Empower and Genpact India could not withstand ED’s scrutiny for Section 4 of FEMA contravention as ED succeeded in establishing that investment received by Empower by way of FDI and NCD during 2015-23 was remitted outside India by resultant entity New Genpact India, in the guise of repayment of loans to Genpact Luxembourg during 2018-23 from free reserves of the new entity quantifying approx. Rs 7800 crores, thus qualifying as round-tripping.”
Maheshwari said the High Court had upheld the seizure of properties under Section 37A, leaving Genpact to pursue its rights and contentions before the competent authority empowered to confirm the seizure.
The court consequently dismissed Genpact’s challenge to the seizure of its Gurugram head office. It also clarified that the seizure would not prevent the company from carrying on its lawful business operations from the property. Genpact cannot create third-party rights in the property or transfer, alienate or encumber it. The judgment does not, however, amount to a final finding that Genpact violated FEMA.
The HC said the alleged transactions, the alleged contravention of FEMA and the nexus between the investigation and the proposed investment are left open for consideration by the appropriate authority in accordance with law.
HC sets aside ED’s NOC rejection
The company’s petition also c
oncerned the ED’s January 13, 2026, communication rejecting its application for an NOC to invest $100 million in Genpact Global (IFSC) Pvt Ltd, its proposed GIFT City treasury entity.
The HC set aside the rejection and directed the competent authority to reconsider the application and pass a fresh, reasoned and speaking order within 10 days of submission.
Maheshwari also said the agency could investigate the cross-border money-laundering implications if the FDI received by Empower is found to have tainted sources. His comments represent a legal assessment of possible next steps and not a finding by the High Court.
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