SC Holds Lalit Modi Personally Liable in FEMA Violation
- ByAdmin --
- 30 Jun 2025 --
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In a significant verdict that strengthens the accountability of individuals in leadership roles, the Supreme Court has held former IPL Commissioner Lalit Modi personally liable for violations under the Foreign Exchange Management Act (FEMA), 1999. The judgment highlights how individuals cannot hide behind the corporate structure when directly involved in unlawful foreign exchange transactions.
Background
- The case stemmed from the 2009 Indian Premier League (IPL) season, which was moved to South Africa.
- During the conduct of the tournament, the Enforcement Directorate (ED) alleged that foreign exchange transactions worth over ₹243 crore were carried out without obtaining mandatory permissions from the Reserve Bank of India.
- These transactions included broadcasting deals and event management contracts signed by the Board of Control for Cricket in India (BCCI) under Modi’s leadership.
- The ED initiated proceedings under FEMA, naming Lalit Modi as a key individual responsible for the violations.
What the Supreme Court Held
The Supreme Court upheld the orders of both the adjudicating authority and the appellate tribunal under FEMA, making several important observations:
- Direct Involvement Means Personal Liability
Modi, in his capacity as IPL Commissioner, was the primary decision-maker in the arrangements that led to the alleged violations. The Court ruled that such direct involvement attracts personal accountability, regardless of the organizational structure.
- Corporate Veil Cannot Be Misused
The Court clarified that the principle of corporate veil cannot be used as a shield in cases where the individual’s role in the contravention is clear and active.
- FEMA is Civil, Not Criminal – But Still Binding
The ruling emphasized that FEMA is a civil law and does not require criminal intent (mens rea) for liability. Non-compliance, even without wrongful intent, invites consequences under FEMA.
- Burden of Proof on the Accused
Once a contravention is shown, it is the responsibility of the accused to prove they acted with due diligence and without intent to violate the law. Modi was unable to discharge this burden.
Broader Legal Significance
- Reinforces Personal Accountability
The judgment sets a strong precedent that individuals in key roles within organizations must ensure legal compliance in financial matters, especially in international dealings.
- Encourages Transparent Financial Practices
It sends a clear message to sports bodies, corporations, and public figures that bypassing financial regulations—knowingly or not—can lead to personal liability.
- Reaffirms the Role of FEMA
The Supreme Court’s approach solidifies FEMA’s status as a proactive regulatory tool meant to monitor and control foreign exchange, even in civil cases.
Conclusion
This decision is a reminder that leadership comes with responsibility. Individuals holding influential positions cannot act with impunity or shift blame onto the institutions they represent. In holding Lalit Modi personally liable, the Supreme Court has made it clear that those who take decisions involving large financial stakes and cross-border dealings must be ready to face scrutiny for any regulatory breach. This verdict is likely to influence how corporate leaders and public officials approach compliance in the future, with greater personal caution and legal awareness.
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