ED Case Against KTR: Key Developments In The Formula E-Race Scandal

• General

• December 21, 2024

In connection with an ongoing ACB probe, the Enforcement Directorate has also started an investigation into the Formula E-race controversy. The case is on charges of power misuse relating to transferring funds to a foreign company. On the basis of the FIR, the ACB filed an ECIR and conducted further investigations. The key persons listed in the case include erstwhile minister KTR, Arvind Kumar- Special Chief Secretary of Revenue Department and BLN Reddy- former Chief Engineer of HMDA. The investigation is to be conducted in the FEMA and PMLA acts while focusing on the fund transfer made to UK-based Formula-E Organizations (FEO) towards organizing the Formula E races in Hyderabad. The notices to the accused are likely to reach soon, and the statements would serve as a basis for further action.

Timeline of Actions by ED

• Collection of Data in the Morning: The ED promptly sought information on Friday morning itself after the ACB filed the case on Thursday.
• Filing of Case in the Evening: In the evening, the ED filed an ECIR based on the information collected.
• Focus areas: Transference of £45.71 crores British Pounds in October 2022, from the HMDA's account held with a bank into FEO's account was detected under probe and would be tested with regard to contravention of FEMA and PMLA provisions also.

The ED will monitor whether the diverted amount ultimately ended up in unaccounted money and was eventually credited to the unauthorized account, so the money transfer tax anomaly has marked a critical focus area

Frauds by Diversion of Funds in Tax Payment

The investigation has thrown up serious questions about tax compliance in transfers of funds to the FEO. Key points are as follows:

• There is Absence of Regulatory Approval as the government departments have to seek RBI permission for transfer of money abroad. It was not sought in respect of any transaction related with transactions undertaken in the month of October, 2022
• Taxes were not deducted and it was flagged during the process of audit. Hence, HMDA had to pay ₹8.06 crore towards income tax to the Income Tax Department.
• It is said that the Income Tax Department claims a balance amount of ₹16 crore pending.

Now, the ED will enquire about HMDA's inadequacy to provide for tax compliances as well as from the money transferred out of which went to this foreign company.