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Rediff.com  » Cricket » Why Raj Kundra is not a stakeholder of Rajasthan Royals

Why Raj Kundra is not a stakeholder of Rajasthan Royals

April 30, 2010 18:52 IST

Both Shilpa Shetty and her husband Raj Kundra were up in arms when Board of Control for Cricket in India chief Shashank Manohar revealed that their names do not reflect as stakeholders in the documents of Rajasthan Royals.

Truth is, much to the disappointment of the celebrity couple, Kundra's stake in the franchise is legally questionable. The Income Tax department and Enforcement Directorate -- the two agencies investigating the Indian Premier League franchisees -- have come across a web of transactions that violated Foreign Investment Promotion Board and Reserve Bank of India guidelines.

Worse, there is a huge question mark over the stakeholders of Rajasthan Royals, who, the the agencies say, are actually not the actual owners of the team. They say the violations started from the time UK resident Manoj Badale's company Emerging Media won the bid for Rajasthan Royals.

Badale directly sent the money to BCCI-IPL accounts in January 2008, instead of the normal banking channels, say ED sources. While Badale paid the money, the franchisee agreement was signed by Ms Jaipur IPL Pvt Ltd in April 2008. The agencies claim the deposits made by Badale were Foreign Direct investments.

Another company, EM Sporting Holdings Ltd in Mauritius, paid the balance deposit to BCCI-IPL in May 2008. Later, on July 22, 2009, Jaipur IPL approached the FIPB, which clears all FDI proposals in India, for issuance of shares to Emerging Media and EM Sporting Holdings in lieu of the deposits made by them to the BCCI-IPL.

The FIPB, however, rejected their plea in November 2009, as Jaipur IPL could not provide satisfactory proof of receipt of foreign exchange. This happened because Badale and EM Sporting Holdings remitted the money directly to the BCCI-IPL.

IT and ED officials said the money received was not remitted through a normal banking channel or by debit to the Non Resident External/Foreign Currency Non-Resident rupee account.

In October, Jaipur IPL also approached the RBI, but were told to approach the FIPB, which said that the money was received before Jaipur IPL was formed.

Thus, IT and ED officials told rediff.com, the issue of who actually owns Rajasthan Royals is still not clear.

Meanwhile, the two directors of Jaipur IPL who founded the company sold their stake in Jaipur IPL to Emerging Media and EM Sporting Holdings, but the shares were not transferred because Jaipur IPL's claim about their deposits to BCCI-IPL was being questioned by FIPB and RBI.

Interestingly, while the ownership of Jaipur IPL is itself under question, Emerging Media went ahead and sold shares to other players like Suresh Chellaram, Lachlan Murdoch and Raj Kundra's family. Thus, with no RBI or FIPB approval of transfer of shares from Jaipur, the huge question mark over the validity of the shares purchased by Kundra, Chellaram and Murdoch.

An expert in a leading mergers and acquisition firm said the legal validity of the purchase of shares by Kundra and others is suspect since the Indian shareholders have still not transfered the shares to a foreign company, which is Emerging Media Sporting. Due to the sensitivity of the case he refused to go on record.

That's not all. Tax officials say the claim by EM Sporting that they bought the shares at face value of Rs 10 is also highly suspicious.

After talking to the franchise's chartered accountant, the authorities found that the company made a profit of Rs 3.25 crore even as the directors, Castellino and Barthakur, claimed a loss of Rs 3 crore as an excuse to sell the shares for merely Rs 100,000.

If a foreign investment comes through an unlisted company, a fair and independent valuation is mandatory before the shares are sold as per the company law. This did not happen in case of Jaipur IPL, say investigating agencies.

N Ganesh