The group close to former BCCI president N. Srinivasan has reacted strongly to the allegations made on the alleged undervaluation of Chennai Super Kings during the Working Committee meeting in Kolkata on Sunday.
While the BCCI has sought fresh legal opinion on the demerger and transfer of shares of Chennai Super Kings (CSK), Srinivasan’s camp was confident of its position.
Several BCCI members felt CSK was worth far more than Rs. 5 lakh but P.S. Raman, who represented the TNCA at the meeting, said to The Hindu , “The Management of India Cements Ltd (ICL) had decided to hive off their ownership of the franchise CSK by way of a de-merger in and by which the said asset would be transferred to a company called Chennai Super Kings Cricket Ltd. (CSKCL) which will be a hundred per cent-owned subsidiary of ICL itself. This de-merger is Phase 1.”
He added, “The said transfer of the franchise to CSKCL which is a wholly-owned subsidiary did not involve any consideration or sale.” It was approved by an independent law firm.
Maintaining there was no ‘sale’ and therefore no ‘valuation’, Raman said, “The said law firm gave an opinion to the effect that the transfer of the franchise to CSKCL as a wholly-owned subsidiary will not involve any change of control contemplated by the franchise agreement and hence advised the grant of approval just as it had earlier been granted some years earlier to the franchise Deccan Chargers.
“The law firm, however, recommended imposition of the condition that ICL should execute an irrevocable guarantee to ensure compliance and performance of all franchise conditions by its subsidiary CSKCL.”
The Governing Council approved Phase 1.
Raman revealed, “The Phase 2 of the de-merger requires ICL to give up its direct ownership of CSKCL and all the shareholders of ICL will become direct shareholders of CSKCL in the same proportion to their holding in the parent company.
This too did not involve any sale as ICL was merely handing over direct control and ownership of the franchise to its shareholders instead of owning the same itself.”
Putting his case forward, Raman said, “An approval for this was again sought from the GC which, like last time, referred the matter to the same law firm which gave a detailed opinion this time holding that the transfer from ICL to its own shareholders, though not amounting to a sale, will still result in a change in control as contemplated by Clause 10.4 of the Franchise Agreement.
“However since it was only a transfer of the CSK franchise alone and not the entire ICL, clause 10.6 requiring ascertainment of market value and payment of five per cent thereof to BCCI would not arise. Consequently the notional value of the transfer at Rs. 5 lakh being the share capital of CSKCL would have to be accepted since there has, in effect, been no sale to an outsider.”
Eventually, Phase 2 was given the go ahead as well by the previous governing council.
Alleging bias by the new General Council, Raman said, “Curiously enough, transfer of shares within Kings XI Punjab, which had been given approval without valuation, has not been questioned.”
