ED’s failed to Apply Proportionality Doctrine Results in Penalty Reduction for Jaipur IPL Cricket Pvt Ltd

In a recent ruling, the Bombay High Court upheld the decision of the Appellate Tribunal for SAFEMA, FEMA, NDPS, PMLA & PBPT Act (Tribunal), which significantly reduced the penalty imposed on Jaipur IPL Cricket Pvt Ltd from an initial amount of Rs.98.35 Crores to a revised sum of Rs.15 Crores. This pivotal decision emerged from a case where the Special Director, responsible for adjudicating the matter, was found lacking in the application of the doctrine of proportionality.

The Court, comprising Justice K.R. Shriram and Justice Neela Gokhale, scrutinized the proceedings and highlighted the absence of justification behind the imposition of the maximum penalty by the Special Director. Conversely, the Tribunal, after a comprehensive review of pertinent evidence, intervened and mitigated the penalty.

The justices remarked, “The Special Director failed to apply the doctrine of proportionality as interpreted by the Apex Court, opting to impose the maximum penalty without just cause. Having thoroughly examined the impugned order, this Court finds no fault in the Tribunal’s findings, reasoning, and conclusion.”

Advocate Ashish Chavan represented the Appellants, while Advocate Rohan P. Shah represented the Respondents throughout the legal proceedings.

The case originated from investigations initiated by the Mumbai Zonal Office of the Directorate of Enforcement concerning irregularities within the Indian Premier League (IPL), organized by the Board of Control for Cricket in India (BCCI). The scrutiny revealed discrepancies in the allocation of ownership during the IPL team bidding process, specifically related to deposits made by Jaipur IPL Cricket Pvt. Ltd. and its Directors and Promoters, violating various FEMA provisions and related regulations.

Challenges were raised via appeals under Section 35 of the Foreign Exchange Management Act, 1999 (FEMA) against the Tribunal’s decision, which modified the Special Director’s ruling, significantly reducing the penalty from the initial amount.

The Court deliberated on whether the Tribunal’s intervention in the Special Director’s order was justified, focusing on the doctrine of proportionality. It highlighted the lack of explanation behind the imposition of the maximum penalty in the Special Director’s order. While acknowledging the FEMA contraventions, the Special Director arbitrarily tripled the alleged sum involved, failing to specify individual roles. In contrast, the Tribunal meticulously examined the charges and criticized the Department for not establishing individual roles and responsibilities.

Crucially, the Court noted the absence of malice or guilt on the part of the Respondents, emphasizing the lack of discussion by the Special Director regarding individual roles in justifying the penalty under FEMA provisions.

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The Tribunal’s assessment revealed no loss to the exchequer, as the remittances stayed within India and were utilized for intended purposes. Additionally, it highlighted the Rajasthan Royals franchise’s clean record in IPL participation without contraventions over the years.

Ultimately, the Court aligned with the Tribunal’s decision, emphasizing the Special Director’s failure to adhere to the doctrine of proportionality. Consequently, the Appeal was dismissed, affirming the Tribunal’s judgment.

Cause Title: The Special Director v Jaipur IPL Cricket Pvt. Ltd (2023:BHC-AS:37322-DB)

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