MUMBAI: In a major relief to former Indian Premier League (IPL) chairperson, Lalit Modi, a tribunal has set aside a penalty order issued by the Enforcement Directorate (ED) against him, the Board of Control for Cricket in India (BCCI) and some others in a 15-year-old FEMA case relating to hosting of the 2009 T-20 cricket tournament in South Africa.
Event Context
The 2009 tournament was moved to South Africa due to security concerns for the game due to the general elections in India that year. The BCCI had moved funds to South Africa for the event, which the ED considered a violation of the Foreign Exchange Management Act (FEMA).
Team Analysis
The order setting aside the ED’s 2018 penalty was delivered by the appellate tribunal under SAFEMA (Smugglers and Foreign Exchange Manipulators – Forfeiture of Property – Act), on July 16.
The ED had imposed the penalties as the BCCI had made forex remittances to South Africa, equivalent to ₹243.45 crore, without RBI’s approval. The central agency had served FEMA show cause notices in 2011 followed by penalty orders in 2018 against Modi, some former BCCI executives and others.
Lalit Modi, in a statement issued from London on Tuesday, said, “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.” Current Account transactions of this nature do not require the RBI’s approval.
“The tribunal also found that I was neither responsible for BCCI’s statutory FEMA compliance nor vested with the financial authority alleged by the Enforcement Directorate, and it has set aside the penalties imposed on me in the principal proceedings. This marks the conclusion of what has been the single most significant legal matter arising from the 2009 South Africa IPL,” added Modi in his statement.
The tribunal said, “It is for the reason that the definition of ‘Capital Account Transaction’ under Section 2(e) of the Act of 1999 covers all transactions which alters the assets or liabilities, including contingent liabilities, outside India. The transaction involved in the present matter does not fall within the definition of ‘Capital Account Transaction’ because it has not altered the assets or liabilities of the person resident in India which includes even the contingent liability.”
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Rejecting the main premise of the ED’s case, the tribunal said in its order, “We have considered the submissions… and find that if, in a given case, the payment towards the service was made from time to time and that too without budgeting, then, according to the respondent (ED), it would fall in the definition of ‘Capital Account Transaction’. We are unable to accept the argument advanced by the respondent (ED).”
