The ACB has gathered sufficient evidence to investigate potential corruption in the transfer of ₹46 crore (excluding ₹9 crore GST) in foreign exchange to the UK-based Formula E Organisation for the 2024 season
Published Dec 26, 2024 | 5:09 PM ⚊ Updated Dec 26, 2024 | 5:09 PM
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The Anti-Corruption Bureau (ACB) is preparing the ground to serve notices to the accused in the Formula E Race case.
The probe agency has named former Municipal Administration and Urban Development Minister KT Rama Rao as accused No:1, the then principal secretary of the department Arvind Kumar and the then chief engineer of the HMDA, BLN Reddy.
The ACB filed the case under Section 409 (criminal breach of trust) and 120-B (criminal conspiracy), and Section 13(1)(a) of Prevention of Corruption Act.
The ACB has already collected enough evidence to commence its investigation into the possible corruption angle in the transfer of ₹46 crore in foreign exchange (excluding ₹9 crore GST) to the UK-based Formula E Organisation (FEO) for conducting the season 10 of the formula E Race in February, 2024.
The Telangana High Court has directed the ACB not to arrest KTR until 30 December. Meanwhile, the ACB is reportedly preparing to summon Arvind Kumar and BLN Reddy to record their statements. The agency will decide how to proceed with KTR’s case after the court hears his petition on Friday, 27 December.
The ACB’s central investigation unit, responsible for high-profile cases, is closely examining the money trail following its transfer from HMDA’s account at the Indian Overseas Bank in Himayatnagar, Hyderabad.
Sources suggest the unit is also investigating why Hyderabad-based AceNextGen, the sponsor for Season 9, withdrew its support. The company cited financial losses from the previous season as the reason, but authorities are exploring whether any government involvement played a role.
Though there have been several procedural violations in transferring the money to FEO, the ACB is more interested in finding evidence to ascertain if the money found its way back into the accounts of any one of the accused in the case.
After the ACB registered the case last Thursday, following Governor Jishnu Dev Varma’s approval to prosecute KTR, the Enforcement Directorate (ED) filed an Enforcement Case Information Report (EIR) on Friday against the three accused. The ED is now investigating potential violations of FEMA and PMLA, based on the ACB’s FIR.
The ACB has reportedly seized evidence, including correspondence between HMDA and FEO before the money was transferred in pounds. It is also examining documents from the Municipal Administration Department related to the case. Additionally, the ACB may investigate why AceNextGen withdrew its sponsorship. Currently, the ACB has gathered sufficient evidence indicating procedural lapses in releasing the funds to FEO.
The case involves the funding proposal for the second of four Formula E race seasons in Hyderabad. In 2022, the Municipal Administration Department, under the previous BRS government, signed a tripartite agreement with Formula E Organisers (FEO) and Ace Nxt Gen Pvt Limited to host the ninth, tenth, eleventh, and twelfth seasons. The ninth season took place in Hyderabad on 10-11 February 2023.
Ace Nxt Gen, initially responsible for financing all four seasons, withdrew after the first event, citing financial losses. When FEO expressed interest in organising the second event, Arvind Kumar, the then principal secretary of the Municipal Administration Department, transferred ₹55 crore to facilitate the February 2024 race. This decision, made on the advice of KT Rama Rao, the then Municipal Minister, occurred after Ace Nxt Gen withdrew, with HMDA assuming the role of promoter.
The ACB’s case against Rao and the other two accused revolves around procedural lapses in processing the payments. The ₹55 crore was transferred in two tranches on 3 and 11 October 2023, even before an agreement was signed on 30 October 2023.
The rules stipulate that for HMDA payments exceeding ₹10 crore, clearance must be obtained from the state government. While KTR is the vice-chairman of HMDA, only the chairman—the chief minister—can approve payments over ₹10 crore. However, this procedure was not followed, as there is no documentary evidence showing KCR’s involvement in authorizing the transfer.
KTR has publicly stated that he instructed the then Municipal Administration principal secretary, Arvind Kumar, to transfer the funds orally, bypassing the HMDA board meeting, Finance Department approval, and state cabinet clearance.
Additionally, when transferring money in foreign exchange, prior approval from the RBI is required, but this was not obtained. The ACB may also investigate potential lapses by Indian Overseas Bank in processing the transfer to FEO in London in pounds sterling.
Making the situation more dicey, it was found that the payments were made when the model code of conduct was in force for the Assembly elections (from 9 October to 4 December 2023), without approval from the Election Commission of India (ECI). Opposing KTR’s petition for quashing of the FIR recently, the ACB argued in the High Court that the agreement had committed the state to cover additional costs, without proper authorisation and in violation of the established procedures. The agreement included a financial commitment of ₹600 crore by the state government, the ACB had said.
Another factor that has become very embarrassing for the accused in the case, was that the amount was paid without deducting Income Tax and as a result the state had to bear a burden of ₹8 crore.
Advocate General A Sudarshan Reddy, appearing for the ACB during arguments in the Telangana High Court, stated that further investigation would reveal whether the state government suffered any loss and, if so, the extent of the loss, and whether anyone had benefited personally by the deal.
(Edited by Ananya Rao)
