HC dismisses appeal preferred by CSK franchisee challenging ED proceedings

The Madras High Court on Tuesday dismissed writ appeals preferred by India Cements, franchise of Indian Premier League cricket team Chennai Super Kings (CSK), and its top executives, including Managing Director N. Srinivasan, challenging communications sent by Directorate of Enforcement asking them to appear for enquiry in connection with alleged violation of the provisions of Foreign Exchange Management Act (FEMA) when the team toured South Africa in 2009.

A Division Bench of Justices K.K. Sasidharan and Justice R. Subramanian dismissed the appeals and upheld an order passed by Justice B. Rajendran on March 2, 2017 refusing to interfere with the communications issued by ED on November 4, 2016 asking the present appellants to appear for enquiry on November 24, 2016.

The appellants included the company’s executive president T.S. Raghupathy and vice-president (finance and taxation) R. Hariharasubramanian. According to them, their company had bagged the franchise of CSK alone in 2007 and the 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 which, in turn, made arrangements for the matches in association with Cricket South Africa.

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. All the four writ petitioners sent a detailed reply to the notices on June 19, 2015.

Subsequently, the Deputy Director summoned the petitioners for an enquiry without explaining as to whether the written replies submitted by them were accepted or not, the petitioners claimed and 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.

However, Justice B. Rajendran dismissed all the four writ petitions by a common judgment on March 2, 2017, and hence, the present appeal.

In his judgment, the single judge had held that elaborate reasons need not be given for summoning the petitioners and that it was sufficient for the Deputy Director to have indicated in his communication that he required their presence for “an in-depth examination” of the charges against them.

Nevertheless, since the date on which the petitioners had been summoned had expired by the time the writ petitions could be disposed of, the judge directed the Deputy Director to issue fresh notices requiring their presence on a future date. Assailing his judgment in the present writ appeal, the petitioners contended that the single judge had failed to see that they could not be summoned without any reason.

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