Arvind Kumar, former Special Chief Secretary, MA&UD, said neither HMDA nor MA&UD office provided him any files to answer the questions raised.
Published Feb 09, 2024 | 2:13 PM ⚊ Updated Feb 09, 2024 | 2:13 PM
Aravind Kumar (R) said the agreement was signed in the presence of the then MA&UD minister KT Rama Rao (L), the competent authority.
An alleged breach of contract by the Telangana government forced Formula E Operations to cancel the Hyderabad leg of the 2024 ABB FIA Formula E-Prix, slated for Saturday, 10 February.
The cancellation shocked motorsport enthusiasts in Hyderabad and elsewhere in the country since it was the only Grand Prix held in India.
Formula E said that it decided to cancel the Hyderabad race after the Telangana government’s Municipal Administration and Urban Development (MA&UD) Department did not fulfill the host city agreement signed on 25 October 2023.
The agreement was between the MA&UD Department, Ace Nxt Gen (owned by Chalamalasetty Anil Kumar, the CEO of Greenko, an alternative energy firm), and Formula E Operations.
Formula E added that the Hyderabad E-Prix was part of a multi-year agreement (at least four years).
The inaugural E-Prix in the country was held in February 2023, with the then MA&UD minister KT Rama Rao playing a major role in bringing the race to the city.
Chief Minister A Revanth Reddy now holds the MA&UD portfolio.
The MA&UD maintained that Ace Nxt Gen Pvt Ltd, the promoter of the event, did not meet the contractual obligations, which led to the cancellation of the much-anticipated event. However, to date, no action has been initiated against the promoter.
The promoter reportedly opted out after incurring huge losses in the previous season.
Following the Formula-E fiasco, Chief Secretary Santhi Kumari sought an explanation from Arvind Kumar on 6 January 2024. Kumar, who was the Special Chief Secretary, MA&UD, is now the Special Chief Secretary (Disaster Management) in the Revenue Department.
It was also alleged that Kumar had disbursed ₹54 crore (including a tax amount of ₹9 crore) from government resources without necessary approvals, even before the agreement was signed.
Kumar, in his reply, said he was responding based on his memory since “no details have been provided by the Hyderabad Metropolitan Development Authority (HMDA) of the MA&UD Department.
“I have been served a memo regarding the conduct of Formula-E racing in Hyderabad alleging certain lapses and to explain within seven days the factual position in this regard. Since I have demitted the office of MA&UD with effect from 18 December 2023, and since I will be requiring certain factual details from the relevant files of the HMDA.
I request that I would accordingly be requiring an additional 10 working days to go through the same. I wish to state that no details have been provided to me so far by HMDA or the office of the MA&UD department.
In the absence of details as sought I am unable to provide the specific details and would thus be replying based on my memory and the limited facts available to me,” he said in response to the chief secretary’s notice.
Below are the major questions raised in the notice, and Kumar’s response to them.
Q: Why the tripartite Long-Form Agreement was entered into with Formula E Operations (FEO) and a private organiser, without following the due process of getting approval from the competent authority, and in violation of Secretariat Business Rules?
A: The letter of intent, to host the event in Hyderabad from Season 9 onwards, was entered with FEO in January 2022, in the presence of the minister, Municipal Administration and Urban Development (KT Rama Rao).
Following this, the Long Form Agreement (LFA) was signed on 25/10/22 between the MA&UD dept, as the “Host City” (referred to as “City”), M/S Ace Nxt Gen Pvt Ltd, for the organisation of the event (referred to as the “Promoter”) and Formula E Operations Ltd (FEO). The LFA applied for 4 seasons:-Seasons 9 to 12.
Under this agreement, while the fee for the event and other related expenses were to be borne by the Promoter, the host city was to make the track available for the event and undertake related civil works to make the track worthy of the racing.
The Season 9 race accordingly happened on Feb 10 & 11, 2023. The agreement was with the approval of the minister MA&UD who’s the competent authority for the MA&UD department, and the agreement was accordingly entered into by the head of the MA&UD department.
Q: Why due permission was not taken, and the issue not brought to the notice of the competent authority, when the tripartite agreement was terminated by the FEO, allowing the Promoter, who was at gross default, go free of any liability, while the additional burden of conducting the event, besides hosting the same was passed on to the government?
A: The then Promoter has not cancelled his part of the contract officially to date. However, as understood, considering the net direct returns not by the Promoter’s expectations or what he had invested, it had not come forth till the time the agreement for Season 10 was to be confirmed and the first installment of the fee paid by June 2023.
Accordingly, Hyderabad was not on the calendar for Season 10 when the FEO released the provisional calendar on 20 June 2023 due to non-confirmation of the same by the state government.
The organisers (FEO) were keen on continuing the race in Hyderabad and the Minister for Municipal Administration, given the time-bound deadlines which were fast nearing, had instructed the MA&UD department to go ahead with the event for Season 10, pending the finalisation of an alternative promoter and legal action against the then Promoter, if any.
Based on the email received from the FEO dated September 25 detailing the payment terms, etc, a file was circulated to the Minister MA&UD on 27.09.2023 for a proposal to conduct the Season-10 event with the HMDA playing the responsibilities of both the Host City and the Promoter. Subsequently, the FEO terminated the contract with the then Promoter.
It is clarified that the competent authority, the minister of the MA&UD department was kept informed at every stage and that the due permission was obtained from the competent authority. It is further clarified that Season 10 is not yet over and the legal action against the then Promoter would have been initiated by relevant laws and it’s open for the state government to go ahead accordingly.
Q: Why the consequences of dropping the “Promoter” of the Season-9 agreement was not properly examined, including its financial implications and necessary action not initiated to claim damages from the defaulting “Promoter”?
A: As mentioned above, the initial tripartite agreement for Season 9 was based on the understanding that the Promoter would pay the fees for the event and also undertake a few other related works.
The conduct of Season 10 was time-bound and since the Promoter wasn’t coming forward to meet its part of the obligation for Season 10 and the fact that Hyderabad had already missed the first provisional list of cities for Season 10 as announced on 20 June 2023, the competent authority had directed the HMDA to conduct Season 10, by paying the fee, pending finalisation of an alternative promoter and legal action against the then Promoter, if any, based on the violation of clauses on the contractual agreement.
The process is not yet over and it is for the MA&UD to initiate legal action accordingly against the then Promoter.
