INTRODUCTION

Cricket and its association with the Indian emotions is writ large on the faces of the common mass. People religiously worship cricket and this trend has been going on for years now. It is definitely more than just a game, where the cricketers are regarded as demigods and factually worshipped by the common man. The newest form of cricket, the Twenty20 format has of late created history in the arena of sports. After this new cricket format was introduced, people have gained more interest and thus the popularity graph is only going up.The IPL (Indian Premier League) history, rather origin is quite exciting. The concept of IPL was initialized when Lalit Modi, the Vice President of the Board of Cricket Control in India (BCCI) put forth his vision for the Indian Premier League.Following the same format as that of the club football in Europe, particularly the English Premier League, IPL was launched as a competitive response to the Indian Cricket League (ICL) which was launched by the Zee Group. The DLF IPL has created history in the Indian cricket sphere, getting the required approval from the Indian Cricket Board. It has brought in huge scope for the entertainment industry as well. The Twenty20 cricket has come on the surface phenomenally after India won the Twenty20 World Cup. From then, India’s involvement with IPL has been rewarding and marvelous.It was in late June 2007 that two men arranged for a meeting for discussing an interesting but different sporting event. It was Lalit Modi (Vice-President of the Board of Control for Cricket in India with Andrew Wildblood (International Management Group, the sports management bigwig) who participated in this history-creating discussion. Then in April 2008, the maiden IPL tournament which Modi had conceptualized and ideated was on the way to come on the forefront. 

The month of February in 2008 experienced the hysterical player auction, created the not-so much needed media hype. The most powerful and rich diaspora of the India community came up in the

bidding process. The bigwigs are from the corporate sector to the entertainment industry – who added all the needed lusture to the tournament. Whooping amounts for different players were being seen - $1.5m for Mahendra Singh Dhoni, $1.35m for Andrew Symonds, $950,000 for Ishant Sharma. Cricket could be so costly an affair – nobody could even think of. Everybody was waiting for recreating history in Indian cricketBollywood stars like Shah Rukh Khan, Preity Zinta, Shilpa Shetty - owner and co-owners of the Kolkata Knight Riders team; Kings XI Punjab and RajasthanRoyals Royalsrespectively made this mega sports event all the more a success.

The grand news on IPL is that it has been able to make it to the fourth rank in the Forbes list of the world's hottest sporting properties. India will hold the third session of the IPL tournament, after the success in South Africa in 2009. People all excited, stage all set, players all ready – the DLF IPL 2010 is surely going to be a spectacular sports event.

Franchises

The winning bidders for the eight franchises were announced on 24 January 2008. While the total base price for auction was US $400 million, the auction fetched US $723.59 million.

On 21 March 2010, Pune and Kochi were unveiled as the two new franchises for the fourth edition of the Indian Premier League. The base price was $225 million. While Pune was bought by Sahara Adventure Sports Group for $370 million, the Kochi franchise was bought by Rendezvous Sports World Limited for $333.3 million. The process was to have been completed on March 7 but was postponed by two weeks after many bidders and the BCCI objected to stiff financial clauses. The second franchise auction fetched total $703 million

WHAT WENT WRONG

There are four clear scams that the BCCI has charged Lalit Modi with. 

Scam No.1: 

Scam number one as alleged by the BCCI is regarding media rights. BCCI alleges Modi duped Sony into believing that WSG Mauritius held rights for IPL. On basis of false claim Modi 'fooled' Sony into agreeing to pay Rs 425 crores in facilitation fee, sent emails to Sony March 23rd 2009, asking the channel to deal with WSG, introduced clauses that if 'facilitation fee not paid, Sony's deal would be scrapped. 

There are also six questions with regard to the TV Rights Scam that the BCCI is seeking answers from Lalit Modi on. 

- Why should a Mauritius based company hold Rs 5000 crores of TV value without paying a single penny in advance? 

- Why was the bank guarantee of Rs 350 crores that was supposed to be given by WSG on March 23rd, 2009, never paid? 

- How did Mauritian company walk away with Rs 425 crores? 

- What did the Mauritian company do to walk away with the money a day after the rights came back to BCCI? 

- Why did Lalit Modi give emails to Sony asking them to negotiate with Venu Nair to win back the rights when WSG had no such global rights? 

- Do the emails of Lalit Modi prove that he was willingly deceiving Sony in negotiation with WSG? 

Scam No. 2: 

The second scam relates to Timeouts introduced by Modi in IPL2. In IPL 2, 600 seconds of extra time were introduced as strategic timeouts. Strangely for rest of world rights, contract did not include these 600 secs. BCCI alleges Modi caused loss of revenue worth crores to Board. 

Scam No. 3: 

The third scam is the Advertisements within Balls scam. Lalit Modi introduced the idea of 150 seconds of ads within balls. Modi handed this without tender to Pioneer Digagsis run by former Sony chief Kunal Dasgupta. BCCI alleges Modi indulged in favouritism hurting Board's interests. 

Scam No. 4: 

The fourth scam is being called the Security van scam. IPL awards contract to Visual Impact headed by Ajay Verma. Contract is to supply 3 vans at Rs 5 crores. Contract further said 4 more vans to be provided over next 7 years. BCCI alleges Modi did not follow due process while awarding contract. BCCI alleges Modi hired IPL security vans at 3 times their market value.

Tax authorities are probing the three-year-old Indian Premier League (IPL), the game's most lucrative tournament, after Minister of State for External Affairs Shashi Tharoor resigned following allegations of improper influence.

The Board of Control for Cricket in India (BCCI) axed IPL chief Modi immediately after the final match of the 2010 series, past midnight, saying he had "brought a bad name to the administration of cricket and the game itself."

The widening scandal has sparked off tensions between the Congress and the Nationalist Congress Party (NCP), a key ally whose chief is seen

close to Modi, ahead of a possible confidence vote in parliament on Tuesday over high fuel prices.

While Modi has not been formally charged and denies any wrongdoing, newspapers have said authorities were investigating reports of improprieties in bidding for teams and in negotiating television broadcast rights for the matches.

"The board looked into the allegations and took a decision to to issue a show-cause notice to Mr Lalit Modi and pending inquiry, decided to suspend him," BCCI president Shashank Manohar told a news conference in Mumbai.

Modi was replaced by a BCCI vice president, Chirayu Amin, a businessman who is also on the IPL governing council.

THE GAME'S HUGE POPULARITY

The IPL helped revolutionise cricket with its short, television-friendly format combined with lucrative advertising and cheerleaders in packed arenas, but it upset many of the sport's traditionalists.

Mukesh Ambani, India's richest man and head of Reliance Industries, Vijay Mallya, who controls United Spirits, the world's second largest maker of alcohol, and Bollywood superstar Shah Rukh Khan all control teams who play in the league. They have paid astronomical sums for franchises and players.

At the top end, West Indian all-rounder Kieron Pollard was snapped up for a reported $2.75 million by Ambani while rights for a team in Pune went for $370 million.

The distraction over cricket imposes further difficulties on a government struggling to capitalise on its re-election to promote policies that would boost investment and ailing infrastructure, as well as reform welfare and subsidies.

Parliament has been disrupted on several days as the opposition demanded a probe into the IPL, with some lawmakers demanding both the BCCI and the IPL be taken over by the state.

The enormous popularity of the game in India has made the BCCI one of the richest sporting bodies in the world and brought to its board politicians, businessmen and royalty.

Farm Minister Sharad Pawar, who is also the head of the NCP, skippered the cricket board for three years till 2008. Arun Jaitley, who leads Bharatiya Janata Party in Rajya Sabha, serves as a vice president.

Pawar's links to the game and his earlier support for Modi have caused frictions with the Congress, especially after Tharoor was forced to resign after Modi accused him of using political muscle to influence team bids.

IPL, the mega cricket event in India leads to a more difficult financial fiasco and crisis in the Indian Economy and Financial Sector. Started from sourcing of fund to finance the team to auctioning the broadcasting rights, every where the lack of transparency and inadequate corporate governance is noticed. The lack of transparency is also emphasized when the Chartered Accountant appointed as auditor of different teams as well as IPL committees failed to highlight the financial irregularities in their audit report. After the financial fraud had taken place, the Government now have called for enquiry by the enforcement directorate, Income Tax Departmental enquiry and enquiry by other authorities including Register of Companies etc. The Indian Premier League (IPL), which began a trend of auctioning cricketing talents by its franchises, seems to have signalled the beginning of a possible accounting issue in future. IPL is three seasons old, but the names of auditors who have certified the financial results of the teams are still in the dark. A host of government agencies have waded into a wide-ranging probe on possible tax evasions and other offenses by IPL teams, emboldened by the controversies surrounding the tournament. The ministry too is gathering details about the franchises, including their agreements with the IPL, bidding arrangements and equity structure from the RoCs. To understand the financial fiasco and fraud that had taken place, let us understand the different areas where suspected fraud and

mismanagement may took place. The detailed inquiry proposed by the ICWAI could unearth the collusion between IPL teams and their auditors over their revenue classification and source of funds. Another aspect that is likely to catch its attention is the high valuations for the IPL teams. Valuation, though not strictly done by chartered accountants (CA appointed by the different team management) is a complex accounting method.

Just like the scam of “Satyam” ICAI has sought the financial statements of the eight Indian Premier League franchises to study if their auditors complied with accounting standards and best practices after the incidence had actually taken place and in no place any proactive initiative had taken place. It is interesting to note that all the IPL team are predominantly owned by different companies,

like Kolkata Knight Riders (KKR) is owned ny “Red Chilli Entertainment Pvt Ltd”. A companyis formed to mobilize greater amount of fund from different sources both domestically as well as internationally and at the same time to get the shelter of corporate veil. It is interesting to note that Register of Companies (ROC) has also initiated measures to lift te corporate veil and investigate into the issue in depth. However, in such cases, disciplinary actions have since been initiated against any of the auditors or the learned members of the Institute of Chartered Accountants of India. “The kind of financial irregularities we are talking about could not have been possible without the knowledge of the auditors,” said the financial experts of the profession.

Violation of FEMA provision / Benami holding of shares & Taxability

There have been reports that funds from tax havens like Mauritius have been pumped into the league by various franchises in violation of FEMA provision. The Enforcement Directorate (ED) has already registered a case against the Indian Premier League (IPL) under Foreign Exchange Management Act (FEMA) to inquire into unauthorised transfer of foreign funds. The , registered, is the first by ED against IPL after it received preliminary information that funds from abroad, without the permission of RBI, might have trickled in, they said. It is reported that that funds from tax havens like Mauritius have been pumped into the league by various

franchises in violation of FEMA provisions. As of now, the ED has registered a case against unknown persons and would make an inquiry into the aspect of transfer of foreign funds. ICWAI’s research team would like to intervene into the issue and go for a detailed scrutiny into the scam and trace out the source of the fund and channalisation thereof from different countries including Mauritius. With the battle to oust Indian Premier League commissioner Lalit Modi shifting to the Board of Control for Cricket in India, the Centre on Wednesday turned its full attention to allegations that the wheels of the T20 juggernaut were being lubricated by political influence peddling and illegal infusion of funds. In a coordinated move, Income Tax officials in Mumbai swooped down on three event management and broadcast firms connected to the IPL, while IT investigators sought financial and shareholding details from the 10 team-owning franchisees across India.Amid swirling allegations of benami shares involving politicians and their relatives in the IPL, the Finance Ministry has constituted eight enforcement teams. Their investigations will be spread out across the country with I-T offices in Mumbai, Kolkata, Chandigarh, Delhi, Kochi, Hyderabad, Bangalore and Pune asked to source out information about financial transactions, money flows and team ownership across all franchises. The Research team of ICWAI may in all the way help the Enforcement Wing of the Finance Ministry to unearth background towards formation of certain “shell companies'' at mauritius suspected of routing unaccounted money into IPL franchises.Income Tax DefaultIn Kolkata and Chennai, taxmen visited the offices of the Kolkata Night Riders (KKR), owned by Bollywood superstar Shah Rukh Khan, and India Cements, which owns the Chennai Super Kings team, “seeking information” on the investments made by their managements in the IPL. IT officials are slated to visit the premises of the other six IPL teams in their quest for information.

In Mumbai, a team of over 50 I-T officials started “search” operations on the premises of Multi Screen Media, World Sports Group and Pat Magnarella Management. Since it is alleged that MSM paid WSG a facilitation fee of $80 million for the IPL telecast rights, a deal in which the IPL management is said to be involved. There have been reports that funds from tax havens like Mauritius and the Cayman Islands have been pumped into the league by various franchisees in violation of FEMA provisions. An investigation by a Joint Parliamentary Committee

would immediately be initiated. This is not the first time that IPL has run into a controversy with the income-tax department. “During IPL-1, the tax department had collected more than Rs 90 crore as TDS (tax deducted at source) after investigations while this year also after the returns for IPL-

1 have been filed, some cases have already been selected for scrutiny, Although IPL-2 was not held in India, the taxmen are keeping a close watch on the returns being filed by the parties. “As for IPL-3, Rs 110 crore has been collected as advance tax, and Rs 40 crore more is expected.

CORPORATE GOVERNANCE & TRANSPARENCY

The Corporate Affairs Ministry has promised to step in if the shareholding and equity structures behind the franchises are found to be “hazy” and there are company law compliance issues. It is, however, not yet ready to give a clean chit to all the IPL franchises on the corporate governance front. “If shareholding pattern of any of the franchises is found to be hazy, there will be a company law issue and we will then get involved. On our part, we are already doing the due diligence,” Mr Salman Khurshid, Corporate Affairs Minister, told when he was asked if the IPL and its business model were throwing up corporate governance issues. “They are looking hazy because nobody has asked anyone to disclose yet. We have the filings They are available to the public also on MCA-21. There is a general feeling that it is hazy, but they may or may not be hazy.” Mr Khurshid also felt that it would be appropriate to wait for the agencies under the Finance

Ministry, which are looking into IPL and its franchises' funding, to come to some prima-facie conclusion and further told that let the Finance Ministry arrive at some prima-facie conclusions. If they feel there is a corporate law aspect involved, then we will come into the picture. We are also doing our own due diligence. You can't just shut your eyes to what is happening,” The ICWAI under the aegis of the Ministry of corporate Affairs, Government of India would like to investigate into the fiasco of breaching the Corporate Governance by all the IPL franchises and companies and would like to bring in transparency and financial

discipline Regulatory oversightThe Corporate Affairs Ministry also made it clear that its regulatory oversight would not extend to either IPL or BCCI as both of them are not corporate entities. “We will come into the picture only when there is a company law matter. The research team is in the process of investigating in detail the oppression of the regulatory framework and would come out suggestion towards bringing in good governance and transparency.

With sport events such as IPL turning into money-spinning ventures, ICWAI as a premier accounting & financial institute of the country has decided to look into the ways and means of calculating the fair value of “talents” hired by the sports industry. How to account for such “assets” that can even turn “liabilities” or how to put a “fair value” over such talents are all issues that has been discussed/ analyzed elaborately by ICWAI’s research team. These are emerging areas for the accounting profession. With the kind of development taking place in the sports and entertainment industry, one has to take a futuristic view and identify the possible accounting issues related to talents, and the research team of the institute is venturing into the following areas to ensure greater Transparency, Good Governance, Compliance and greater

Professional Ethics :

1. Valuation of the team

2. Valuation of the Individual team member / sports personality

3. Valuation of discount cards, coupons, that could be redeemed in any franchise, anywhere

4. The bidding arrangement

5. Equity Structure of the team / companies owing the teams

6. financial irregularities

7. Possible nexus with the auditors,

8. Cross Country sourcing of funds

9. Money laundering from funds from tax havens like Mauritius.

10. Gross violation of Foreign Exchange Management Act (FEMA) Provisions

11. Inquiry into the aspect of transfer of foreign funds

12. Identification of untaxed income of the team owners / companies engaged and brand ambassadors

13. Taxability pf Broadcasting / telecasting Rights

14. Bid evaluation & Tendering procedure

15. Transparency in Tendering & Auction Procedure21. Correct determination of Transfer Pricing in cross country transaction relating to

Broadcasting / telecasting Rights

16. Proper Corporate Governance

17. Bringing in Financial Discipline

18. Corrective measure regarding regulatory oversight

19. Investigation into the scam on behalf of the Register of Companies

20. Introduction of Proper Disciplinary actions against persons involved in the fraud including the Auditors/ Accounting Bodies etc