Royals violated FEMA rules: ED officials
The ED has confirmed serious violations of the FEMA in the transactions carried out by the promoters of Rajasthan Royals — the IPL team in which Lalit Modi's brother-in-law Suresh Chellaram and Bollywood actress Shilpa Shetty hold stakes.india Updated: Apr 22, 2010 23:44 IST
The Enforcement Directorate (ED) has confirmed serious violations of the Foreign Exchange Management Act (FEMA) in the transactions carried out by the promoters of Rajasthan Royals — the IPL team in which Lalit Modi's brother-in-law Suresh Chellaram and Bollywood actress Shilpa Shetty hold stakes.
The ED has also sought government’s approval for an overseas probe into the fund transactions carried out by the promoters of Rajasthan Royals.
“The source of funds remitted by Manoj Badale, promoter of Emerging Media UK and EM Sporting Holdings Mauritius (where Chellaram hold a 44.15 per cent stake), require investigation through overseas sources,” a senior ED official said.
Preliminary investigations by the ED have led to serious questions about the legality of Jaipur IPL’s ownership of the Rajasthan Royals IPL franchise. While JIPL is claiming that they are a wholly-owned subsidiary of Mauritius based EM Sporting Holdings Ltd, the bid money deposited as foreign exchange on their behalf by EM Sporting, Mauritius and Emerging Media Cricket Ltd, UK, is yet to be cleared by regulatory authorities.
“The foreign remittances are not in accordance with the FEMA regulations (8 and 9 of Schedule 1 to FEMA notification),” the ED official said. Regulation 8 specifies that a company in India issuing shares to a person resident outside India shall receive the amount of consideration either by inward remittance through normal banking channels or by debit to the RE account of the person.
The official added that in case of JIPL the bid money (the initial deposit made by Emerging Media and the balance by EM Sporting Holdings) has been received directly by BCCI and not by JIPL.
“These transactions violate Regulation 8 of FEMA and require Foreign Investment Promotion Board (FIPB) approvals. RBI was also not notified in time, Regulation 9 of FEMA notification also stands violated,” the ED official
The FIPB rejected the first application (on Nov 23 2009), and has also deferred the second application made by JIPL to issue shares to the two foreign companies.
“This is because JIPL could not provide satisfactory proof of the receipt of foreign exchange from these two companies,” the ED official said, adding that in these circumstances, JIPL cannot be treated as a wholly-owned subsidiary of EM Sporting Holdings.
Nigeria-based Suresh Chellaram holds 44.15 per cent stake in EM Sporting Holdings through Tresco Internatonal Ltd; Emerging Media, UK holds another 32.41 per cent and actress Shilpa Shetty holds a 12 per cent stake.