New Delhi, April 19 (IANS) The government has ordered parallel probes by virtually all its economic intelligence units into the sources and use of funds by franchisees of the Indian Premier League (IPL) to unearth possible tax evasions and flouting of rules.
"I can assure you that all aspects of IPL will be probed, inclusive of the sources of funding, how these funds were routed and invested," Finance Minister Pranab Mukherjee told the Lok Sabha Monday.
"I can assure honourable members that no guilty or wrong-doer will be spared," he said Monday, the day a communiqué from Rashtrapati Bhavan said President Pratibha Patil has accepted the resignation of Shashi Tharoor as minister of state for external affairs.
Corporate Affairs Minister Salman Khurshid also hinted at independent investigations by regulators attached with his ministry but ruled out suo motu action on the possible violations of the Companies Act by IPL and its franchisees.
"Why should there be any suo motu action from the ministry? There are regulators for everything. If they refer something to us, then we will look at it," Khurshid told reporters here Monday.
"We look only at filings and the appropriate dates of filing. If we find any deficiency, then we take action," he said. "If there are violations, these are to be judged by the Registrar of Companies, since they are the ones who monitor companies."
A probe by the tax department had already first started with the Kochi franchise of IPL last Wednesday after a political row over allegations that Tharoor's friend, Sunanda Pushkar, had received sweat (free) equity from the company called Rendezvous Sports World for the professional services she would render over the next ten years.
After that, officials from the income tax department visited various offices of the IPL in Mumbai and questioned its commissioner Lalit Modi. Based on the documents collected, the tax probe was then extended to other cities as well.
Now, all the wings of the finance ministry have been roped in, officials said.
"Parallel investigations will now be made by four of our agencies. This will be coordinated by the Central Economic Intelligence Bureau," a senior official in the finance ministry said.
"As a matter of principle, we will be probing every person who may be involved - whether directly or indirectly. A host of issues may be involved, service tax, black money, corporate tax, misuse of incorporation status," the official added.
The agencies involved are the Directorate of Revenue Intelligence on illegal overseas transactions, Directorate of Enforcement on foreign exchange offences, Directorate of Anti-Evasion on service tax offences, and the Directorate of Income Tax Investigation.
Finance ministry officials said their main concern was whether ill-gotten money stashed abroad was being brought back into the country, as also whether there has been tax evasion by the IPL and its franchises.
Accordingly, all 10 franchisees of the IPL are under scrutiny -- Rendezvous Sports, Sahara group, Mumbai Indians, Delhi Daredevils, Kolkata Knight Riders, Royal Challengers Bangalore, Deccan Chargers, Chennai Super Kings, Rajasthan Royals and Kings XI Punjab.
According to officials in the corporate affairs ministry, among the issues that could be examined is whether free equity was issued to people after following the guidelines spelt out by the government, based on the provisions of the Companies Act, 1956.
They said what could come under the probe is whether due permission, indeed, was sought from the corporate affairs ministry while issuing the sweat equity, as under law such shares can only be allotted to employees or directors of a company.
They said sweat equity could also be issued only if a company has been in existence for more than a year and also authorised by a special resolution by the board of directors.
For unlisted companies, the guidelines also require a "valuer" to determine the monetary worth that the intended recipient of sweat equity proposes to bring in after consulting relevant experts, the officials said.
But more importantly, if the value of such sweat equity exceeds 15 percent of the paid-up capital or Rs.5 crore, it also requires prior permission of the central government.