Major relief for Lalit Modi: Tribunal quashes penalty imposed on former IPL chairman in IPL 2009 FEMA case

The Appellate Tribunal under the Smuggling and Foreign Exchange Manipulation Act (SAFEMA) has delivered a significant verdict in a long-running FEMA case arising from the relocation of the Indian Premier League’s second season to South Africa in 2009. The July 16 judgement either quashed or reduced penalties imposed on the Board of Control for Cricket in India (BCCI) and several former office bearers, including Lalit Modi, N. Srinivasan and M.P. Pandove. 

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Tribunal quashes penalties on Lalit Modi

The tribunal quashed the penalty imposed on Lalit Modi, who was then vice-president of the BCCI and chairman of the IPL. Calling Modi “the chief architect behind the organisation and conduct of IPL-2 in South Africa", the tribunal said it was “an admitted position that the very concept of the Indian Premier League was the brainchild of the appellant.”

Penalties reduced for BCCI, Srinivasan and Pandove

The tribunal also altered penalties in cases involving other BCCI officials. The penalty on the BCCI was reduced from ₹4 crore to ₹1 crore. In one matter, the fine on N. Srinivasan — then BCCI secretary — was cut from ₹1 crore to ₹10 lakh, while M.P. Pandove — then treasurer — saw his penalty lowered from ₹50 lakh to ₹5 lakh.

However, in a separate show-cause notice, the tribunal did not interfere with penalties of ₹50 lakh each that had been imposed on Srinivasan and Pandove. The bench observed that “both were in charge and responsible for conducting the business of the BCCI in the capacity of the secretary and the treasurer" and found “no illegality in imposing the penalty on them” under that particular notice.

What did Lalit Modi say on the verdict?

Reacting to the verdict, Modi said, as quoted by Cricbuzz, "The Tribunal has rejected the central premise on which the Enforcement Directorate’s case against me had been built. It held that the principal foreign remittances relating to the staging of IPL 2009 in South Africa were current account transactions, not capital account transactions, thereby overturning the foundation of the earlier findings.”

According to him, the bench found that he was neither responsible for the BCCI’s statutory FEMA compliance nor vested was he with the financial authority alleged by the Enforcement Directorate (ED). According to Lalit Modi, he had been framed in the proceedings without any material showing his responsibility.

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He added: “For over sixteen years I have consistently maintained one simple position: I acted in good faith, in the best interests of Indian cricket and the IPL, and committed no personal wrongdoing.”

Reflecting on the decision to move the league to South Africa, Modi said, “The decision to move the tournament to South Africa in 2009 was taken under extraordinary circumstances when India’s general elections made it impossible to host the tournament at home. The successful staging of that season ensured that the IPL survived and ultimately became one of the world’s most valuable sporting properties.”

Background of the case

The case relates to alleged violations of the Foreign Exchange Management Act, 1999, over remittances of USD 49,862,799.42 (approximately ₹243.45 crore at the time) made in connection with hosting IPL-2 in South Africa. The ED had contended that the transfers were capital account transactions made without prior approval of the Reserve Bank of India (RBI) and charged the BCCI officials under Sections 42(1) and (2) of the Act.

The decision cites extraordinary circumstances

The SAFEMA bench accepted the BCCI’s contention that “the 2009 general elections in India made it impossible to host the tournament domestically and that moving the IPL to South Africa was taken under extraordinary circumstances.” Modi added, "The successful staging of IPL-2 ensured that the IPL survived and ultimately became one of the world’s most valuable sporting properties.”

The impugned adjudication order dated May 31, 2018, had earlier imposed penalties in six of 11 show-cause notices, aggregating to INR 10.65 crore. Modi had preferred six separate appeals against those penalties, leading to the tribunal’s July 16 decision that substantially altered the financial and legal outcome for the individuals and the BCCI involved.