Mumbai: The enforcement directorate (ED) has penalized Jaipur IPL Cricket Pvt. Ltd, owner of the Rajasthan Royals Twenty20 cricket team, for alleged violations of the Foreign Exchange Management Act (Fema), according to a person familiar with the development.
“In an adjudication order passed last week, the agency has imposed a fine of Rs.100 crore on Rajasthan Royals,” said an ED official, who did not want to be identified.
“We have our legal team looking into the same and will certainly appeal the exuberant penalty demanded (by the ED),” said Raj Kundra, part owner of Rajasthan Royals.
Jaipur IPL Cricket has been under the scanner of multiple investigating agencies such as the income-tax department, ED and Reserve Bank of India for alleged violations of Fema as well as foreign direct investment and income tax rules. According to the investigating agencies, Jaipur IPL Cricket received money from overseas in violation of Fema norms.
ED found that while Jaipur IPL Cricket was formed in March 2008, the initial payment to the Board of Control for Cricket in India (BCCI) was made by Manoj Badale, through his personal account, on behalf of a consortium of investors led by Emerging Media (IPL) Ltd, the ED official cited above said.
Badale is a director for the UK-based Emerging Media.
Under Fema, a non-resident Indian can remit money to a company against shares through normal banking channels. In this case, the company did not exist when the money was remitted to India.
In 2008, Emerging Media had won the bid for the Jaipur IPL team franchise for $67 million for 10 years of the Twenty20 league.
Later in 2010 when Lalit Modi, the brain behind IPL, came under the scanner of investigating agencies for alleged financial irregularities, questions were raised about the ownership structures of the Jaipur and Mohali (Kings XI Punjab) cricket teams.
According to a BCCI show-cause notice issued to Lalit Modi, a copy of which has been reviewed by Mint, Rajasthan Royals originally submitted their bid through Emerging Media IPL Pvt. Ltd, a company incorporated in the UK and was later awarded to another entity Jaipur IPL Cricket Pvt. Ltd. In the eligibility criteria document submitted by Emerging Media, represented by director Manoj Badale, the only shareholder of the bidder was Badale. “At that time, he had disclosed a structure which was supposedly being finalized to arrive at an Indian operating company which would ultimately control the bidder,” stated BCCI’s show-cause notice to Modi.
According to BCCI’s show-cause notice, supporting documents show that Emerging Media was originally incorporated as M/S Intercede 2246 Ltd in November 2007 and there was only one shareholder, viz, M/S Mitre House Nominees Ltd, London.
The company was later incorporated as Emerging Media IPL Ltd. However, BCCI has found from the franchise agreement that it was executed by BCCI with M/S Jaipur IPL Cricket Pvt. Ltd, and from the Register of Members of Jaipur IPL Cricket Pvt. Ltd there are only two shareholders as on April 2008—Ranjit Barthakur and Fraser Castellino. “It is evident that when the agreement was executed by the bidder, Fraser Castellino was CEO and Signatory. Manoj Badale did not hold a single share in M/S Jaipur IPL Cricket Pvt. Ltd,” BCCI’s notice to Modi had said.
Following the show-cause notice, BCCI in October 2010 had terminated the Rajasthan Royals franchise. Rajasthan Royals moved the Bombay high court challenging BCCI’s decision.
However, the two parties later agreed to resolve their issues through an arbitrator.