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Tribunal upholds FEMA violation charges against Rajasthan Royals

The Appellate Tribunal has upheld FEMA violation charges against Rajasthan Royals promoters in connection with payment of Rs 33 crore made to the BCCI for bidding of IPL franchise

twitter-logo Dipak Mondal   New Delhi     Last Updated: September 5, 2019  | 12:05 IST
Tribunal upholds FEMA violation charges against Rajasthan Royals
The Appellate tribunal accepted the ED's contention that in each of the three tranches of payments made to BCCI, the payments were made by people or entities different from the investors.

The Appellate Tribunal has upheld FEMA violation charges against Rajasthan Royals promoters in connection with payment of Rs 33 crore made to the Board of Control for Cricket in India (BCCI) for bidding of IPL franchise. However, it reduced penalties imposed on the entities involved and struck down penalties on individual directors in the entities linked to promoters of the IPL franchise.

The tribunal which hears appeals against orders passed by FEMA court accepted the Enforcement Directorate's (ED) contention that in each of the three tranches of payments made to BCCI, the payments were made by people or entities different from the investor, a Mauritius based entity, to which the shares were supposed to be issued.

The tribunal noted that correspondences exchanged with a Big 4 consulting firm showed that the arrangement was made to route the investment through Mauritius, but the funds were actually coming into India from the United Kingdom, which is not allowed.

It also based its order on the fact that the Reserve Bank of India (RBI) and Foreign Investment Promotion Board (FIPB) twice rejected the application of Rajasthan Royal promoters for issuance of shares. The tribunal also took into account the fact that the company could not provide satisfactory proof of receipt of foreign exchange to FIPB.

However, the tribunal gave respite to many individual directors associated with the entities linked to Rajasthan Royal promoters by striking down the penalties imposed on them by ED. It held that the ED failed to prove that these individuals were involved in day-to-day management of either the Indian or Mauritian entities at the time the alleged violations were committed by these entities in 2008. It noted that mere fact that individuals are directors in a company cannot be the sole basis for imposition of penalty.

Terming the FEMA violations in the case as 'technical' and 'venial' at best, the tribunal calls the imposition of a huge three times penalty to the tune of Rs 98 Crore on the IPL franchise as untenable and unsustainable, and reduced the same to Rs 15 crore.

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