The Enforcement Directorate’s (ED’s) investigations into financial transactions by IPL franchisees and holding companies reveal that three prominent IPL teams out of eight have links with entities indirectly controlled by former IPL commissioner Lalit Modi and have received foreign funding violating FEMA and RBI rules.
Documents with Outlook show that Rajasthan Royals and Kings XI Punjab have received foreign funding from one entity linked to Modi. Kolkata Knight Riders also received investments from a Mauritius-based company in which Modi has high stakes.
Due to the complex ownership and shareholding pattern of various IPL teams, it is suspected that there is a round-tripping (domestic funds being routed through a foreign entity and brought back to the country) of money through Mauritius, Dubai, Hong Kong and Singapore.
ED documents show that Jaipur IPL (owners of Rajasthan Royals) and KPH Dream Cricket Pvt Ltd (owners of Kings XI Punjab) are sub-holding entities of EM Holding Sports Limited, Mauritius, which is partly owned (44 per cent stake) by Suresh Chellaram, Modi’s brother-in law. The distribution of investments was like this:
- EM Sports Holding Limited has a 99.90 per cent stake in Jaipur IPL (JIPL), while Emerging Media IPL Ltd, UK, has a 0.1 per cent stake in it.
- The EM Sports Holding Ltd shareholding is distributed between the British Virgin Islands-based M/s Tresco International Limited (44.1 per cent) and Emerging Media, UK (32.4 per cent).
- This makes it clear that Tresco International Ltd, Emerging Media-UK and EM Sports Holding are controlled by the same set of people.
Interestingly, ED documents on Kings XI Punjab confirms M/s Colway Investment Limited, Mauritius, holds 4.57 lakh shares of M/s KPH Dream Cricket Pvt Ltd, the owner of Kings XI Punjab. Colway Investments Limited, in turn, is wholly owned by the British Virgin Islands-based Bantree International Limited, whose proprietor is Gaurav Burman, step son-in law of Modi.
Documents also confirm that M/s Sea Land Investments Ltd, Mauritius, has a 45 per cent stake in M/s Knight Riders Sports Private Ltd, Mumbai. ED suspects Lalit Modi to be connected to Sea Land Investments Ltd. Sources in the directorate confirmed that Shahrukh Khan, Gauri Khan and Jay Mehta are not among the directors of Sea Land Investments. The details of KKR are also being probed after taxmen failed to get satisfactory answers on financial transactions by its promoting firm, Red Chillies Entertainment and Sea Land Investments. In case of both KKR and Rajasthan Royals, the government suspects round-tripping of funds.
Taking note of the serious violations of RBI guidelines by the three IPL teams, the directorate has initiated inquiry against the owners of Delhi Daredevils, Deccan Chargers, Royal Challengers and Chennai Super Kings. The ED has also asked Bangalore Royal Challengers, with a net worth of Rs 188 crore, to provide information about its directors, investors and their stake in the company.
According to RBI guidelines, in a foreign exchange transaction the Indian bank receiving money issues a KYC (Know Your Client) certificate which details the source of funds to the account-holder. On the KYC certificate and other relevant documents being furnished, the RBI issues a Unique Identity Number (UIN) to the account operator for each transaction.
Furthermore, each IPL team that received foreign funding should have received them through Non Resident External (NRE) accounts or Foreign Currency Non-Resident (FCNR) accounts. However, ED documents show many IPL teams did not operate such accounts.
The line of investigation points to money-laundering, and makes IPL teams and their holding companies liable to be booked under the Money Laundering Act. As per the legal process pursued by the ED, the directorate, after serving a showcause notice to the parties concerned, can file an fir and move the special court for criminal conspiracy.