FEMA violation: Bombay HC rejects ED’s appeal against cut in Rajasthan Royals owners’ penalty

The tribunal had then held that the amount of Rs 15 crore already deposited by the owners pursuant to the directions of the HC of 2015 was ‘reasonable’ and the same be treated as penalty for contravention of laws

The Mumbai Zonal office of ED had initiated inquiries into the functioning of Indian Premier League (IPL) organised by the Board of Control for Cricket in India (BCCI). As per the information received from BCCI, the ED felt that there were largescale irregularities in the functioning of the IPL and its franchisees.

The agency, after a comprehensive probe, found that the deposits from various sources made during the bidding process by the Jaipur IPL Cricket Pvt Ltd, its directors and promoters, were in contravention of various provisions of FEMA and its regulations.

The ED special director on January 30, 2013, held them guilty of flouting FEMA and imposed a penalty of Rs 98.35 crore to be paid within 45 days.

While a Rs 50-crore penalty was imposed on Jaipur IPL Cricket Pvt Ltd and its directors, the owners of Rajasthan Royals team, a notice for evasion of foreign exchange duties had been issued against EM Sporting Holding, Mauritius and its directors.

Another notice of Rs 14.5 crore was issued against ND Investments, United Kingdom and its directors.

The firms challenged the ED’s diktat before the tribunal which asked them to deposit 40 per cent of the penalty as pre-deposit and the remaining 60 per cent amount through bank guarantees.

The aggrieved firms then appealed against the tribunal’s order before the HC, which in December, 2014, held that “imposition of condition of cash deposit and bank guarantee failed to meet the ends of justice.”

In another order of January 21, 2015, the HC substituted the tribunal’s order of pre-depositing penalty amount and directed the respondent firms to deposit Rs 15 crore with the ED deputy director in eight weeks. It also directed the tribunal to dispose of the appeals uninfluenced by its prima facie observations.

On July 11, 2019, the tribunal held the special director’s order to be ‘perverse’ and reduced the penalty of Rs 98.35 crore to Rs 15 crore, which was already deposited by the respondent firms.

Advocate Ashish Chavan for ED said the tribunal ought not to have taken a lenient view. He argued that the tribunal ought to have considered that the arrangement of the flow of funds by respondents was made to route the investments through Mauritius as the same flowing into India from the UK was not permissible.

Advocate Rohan P Shah for the respondent companies defended the tribunal order.

The bench perused the material on record and held that “there was no error in impugned judgement of tribunal” and the appeals by the ED were ‘without merits and are dismissed as such’.