The Madras High Court on Tuesday dismissed an appeal preferred by India Cements, franchisee of Indian Premier League cricket team Chennai Super Kings, challenging a communication issued to its top executives by the Enforcement Directorate asking them to appear for an inquiry in connection with the alleged violation of the provisions of Foreign Exchange Management Act (FEMA) of 1999 when the team toured South Africa in 2009.
A Division Bench of Justices K.K. Sasidharan and R. Subramanian rejected the writ appeal and pointed out that, unlike the Prevention of Money Laundering Act of 2002, the provisions of FEMA as well as the rules framed under it do not require the officials to record in writing the reasons for summoning people for inquiry.
While authoring the judgment, Justice Subramanian said: “If we are to read into the provisions, such a requirement, the same in our considered opinion, would lead to disastrous results where notices under various enactments which provide for enquiry on the basis of a subjective satisfaction of the adjudicating authority or the enquiry officer or the disciplinary authority would take a stand that those authorities should also record their reasons for forming an opinion and communicate the same.”
The Bench ultimately upheld an order passed by Justice B. Rajendran (since retired) on March 2, 2017 refusing to interfere with the communications issued by ED on November 4, 2016 asking the executives of the company to appear for enquiry on November 24, 2016. According to appellant company, it had bagged the franchise of CSK alone in 2007 and the franchise for the entire IPL format of the game itself in 2009.
Incidentally, in 2009, the Board of Control for Cricket in India (BCCI) shifted the venue of the games from India to South Africa and agreed to support the franchisees with respect to additional expenses to be incurred by them due to the shift in the venue to a foreign country. India Cements entered into an agreement with BCCI and the latter, in turn, made arrangements for the matches in association with Cricket South Africa.
Show-cause notices
Eventually, India Cements incurred additional expenses for the foreign trip. When things stood thus, the company and its top executives received show-cause notices from the Deputy Director of Enforcement on February 27, 2015, seeking explanation as to why they should not be made vicariously liable for suspected infractions of the provisions of FEMA. The company and its executives sent a detailed reply to the notices on June 19, 2015.
Subsequently, the Deputy Director summoned the petitioners for an inquiry without explaining as to whether the written replies submitted by them were accepted or not, the petitioners claimed and also urged the court to quash the communications summoning them to the Deputy Director’s office in Mumbai. They contended that the communications were bereft of material particulars and vague since they did not contain any reason whatsoever.
