Mumbai: In a potentially game-changing move, Rajasthan Royals, winners of the inaugural edition of the Indian Premier League (IPL), and Kings XI Punjab were ejected from the Twenty20 tournament on Sunday for alleged violations, with seven years of their 10-year contracts still to run.

The governing council of the IPL, the most expensive sports asset in the country with its brand value estimated at upwards of $4 billion (Rs17,760 crore), also issued a show-cause notice to the new franchise, Kochi, to end an internal feud within 10 days or face expulsion.

If the governing council follows through on Kochi, it would reduce the IPL, owned by the Board of Control for Cricket in India (BCCI), to seven teams. This could have a bearing on the player auctions that were due to take place later in the year ahead of the fourth edition of the tournament in 2011. The move also raised uncomfortable questions from other franchises on the safety of their investments in IPL.

In happier times: (from left) Preity Zinta, Lalit Modi and Shilpa Shetty. Hindustan Times

A show-cause notice is not an indictment. It only requires the company, and a few related entities in this case, to explain their side of the story.

If wrongdoing is proved, there is a possibility that the ED may impose a penalty on the IPL franchise as well as the BCCI for Fema violations. Under Fema norms, the department can levy a penalty of as much as three times the value of amount of foreign exchange in question. And if there is a property involved in the contravention of Fema, that property can be confiscated.

Kings XI Punjab is also being investigated by the ED for Fema violations.

The IPL dispute could also be headed for the courts. Rajasthan Royals co-owner Raj Kundra said in an interview to NDTV 24X7 television channel that he would be bringing a legal challenge against the expulsion.

The newly appointed IPL governing council met in Mumbai to discuss and decide on the breaches committed by three of the franchisees, K.P.H. Dream Cricket Pvt. Ltd, owner of Kings XI Punjab, Jaipur IPL Cricket Pvt. Ltd, owners of Rajasthan Royals, and the unincorporated joint venture holding the Kochi franchise.

While it found Rajasthan Royals and Kings XI to have breached rules, it noted that Kochi had not.

“As I have been telling all this while about the Rajasthan franchise: They had a different bidder during auctions; the agreement was entered in the name of a different company; the shareholding patterns were different and then the shares were transferred to different people without the permission of the governing council," BCCI president Shashank Manohar told reporters.

Responding to a question whether the council could terminate a 10-year contract prematurely, Manohar answered in the affirmative. BCCI has received money from the franchises for only three editions of the IPL, he said. “We haven’t taken in any further money from any of the franchises."

By late afternoon, it was clear that BCCI’s decision had come as a shock not only to the team owners but also to other franchises and people associated with the game.

BCCI’s decision will now send the fourth season of IPL into a tailspin, said Ayaz Memon, a senior sports columnist, who also writes for Mint.

“Suddenly, you find that three out of the 10 teams may not make it to season four of the IPL. And that two teams have been de-recognized. This will definitely impact the IPL, which has emerged in recent times as one of the most valuable sporting properties in the world," he said.

The expulsions could favour the two new franchises—Pune and Kochi—by freeing up several players from Rajasthan Royals and Kings XI Punjab ahead of the player auctions. The players include Brett Lee, Kumar Sangakkara, Yuvraj Singh, Irfan Pathan, Shane Warne, S. Sreesanth, Shane Watson and Yusuf Pathan.

Rajasthan Royals expressed surprise at the termination of the contract. Maintaining that it had conducted itself transparently, the statement said, “If the only way to achieve this is through legal recourse, then that is a shame for those that seek to invest in sport in India."

In a separate statment, Kings XI said it had been “a loyal franchise since the inception of the IPL, at a time when there was no guarantee or visibility of the leagues’ success."

The franchisee said it “strongly believes that this decision is unfair and not in the collaborative spirit which the IPL has operated in".

A Twitter post by Preity Zinta, co-owner of Kings XI Punjab, expressed surprise. “Still absorbing the news! After working so hard in the IPL and putting my everything, building this team, this is not what I expected! Shocked!"

Vijay Mallya, owner of the Bangalore Royal Challengers, came out in support of the ousted franchises.

He wrote in a Twitter post: “I wonder if IPL franchisees are serious stakeholders whose investments and participation are respected or are they slaves who only come and play?"

Controversial former IPL chairman and commissioner Lalit Modi, who was suspended this year and charged with irregularities during his stewardship of the league, also jumped to the defence of the two expelled IPL teams.

In a Twitter posting, Modi said: “Instead of concentrating on building IPL and BCCI, they have chosen a path of vengeance and in that they will only hurt the game."

There have been insinuations in the media that the two franchises were being targeted because of their alleged links with Modi. Modi’s wife Minal’s sister Kavita is married to Suresh Chellaram, one of the major stakeholders in Rajasthan Royals.

And his step-daughter Karima is married to Gaurav Burman, who is the brother of Mohit Burman, the co-owner of Kings XI Punjab.

Manohar, however, dismissed the claims. “The decisions were not take due to any person," he said.