WOULD THE BCCI BENEFIT FROM THE CREATION OF A SEPARATE CORPORATE ENTITY FOR THE IPL?
This post has been authored by Mr. Aditya Shankar.
Aditya Shankar is a recent law graduate from School of Law, CHRIST (Deemed to be University), Bangalore who is passionate about the sectoral application of law in the field of Sports. A former footballer himself, Aditya is keen on assisting sportspersons to overcome their hurdles with the help of the Law. Currently, Aditya is focusing on mastering his Dispute Resolution skills at a Law Firm in Bangalore so as to better assist sportspersons in their legal disputes in the future.
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Indian Premier League (“IPL”), the brainchild of Lalit Modi, (Ex-Vice President of the BCCI and the first commissioner of the IPL) was the Board of Control for Cricket in India’s (“BCCI”) revolutionary pursuit of restoring the entertainment value in the sport. It was formatted in a manner to be quick-paced like the football leagues of Europe. However, a franchise system was adopted like the professional sports leagues in the U.S.A. to accommodate teams from most parts of the country. What was intended to further develop the game and instill more interest in the sport has unfortunately burdened the “gentleman’s game” with several scandals and issues ranging from spot-fixing, corruption, bureaucracy, and political rivalries, money-laundering, and bid-rigging.
CONCERNS ASSOCIATED WITH THE BCCI-IPL NEXUS
On a deeper analysis, the root cause of all the issues in the IPL point towards the close-knitted relation between the IPL and the BCCI. The BCCI is a registered society under the Tamil Nadu Societies Registration Act, 1975, and enjoys the status of an independent legal entity. It governs all matters related to cricket in India. Even though it functions like the State on certain subjects such as selection of players for international tournaments which is usually done by National sports federations, it has refused to accept that it is a State under Article 12 of the Constitution of India and till date functions largely as an autonomous institution with negligible interference of the Union Sports Ministry. The BCCI consists of members from various state cricket associations of India who ultimately appoint an IPL General Council, consisting of 6 members who are authorized to organize and control the IPL. The governing council thereafter outsources the services to various companies to organize the IPL.
The problems arise because of the very smeared identity of the BCCI. In certain matters, such as appointing and selecting the players for the Indian National team, organizing national tournaments, and representing team India in the International Cricket Council (“ICC”) and Asian Cricket Council, they function similar to the State as per Article 12 of the Constitution of India. In matters related to taxation, they choose to accept their status as a “charitable trust” under Section 11 of the Income Tax Act, 1961, and receive tax exemptions. In all other matters, they prefer to be considered as an autonomous private consortium. This has resulted in the BCCI enjoying complete autonomy with little to no transparency in their functioning and has made a cozy bed for bureaucrats and politicians to further their vested interests. The spot-fixing, bid-rigging, and corruption within the IPL is a result of the lack of accountability and transparency within the BCCI. Money has taken over the sport and corrupted it to the point that even players avoid representing their national teams to play in the IPL. On one occasion, both Chris Gayle and Andre Russell preferred playing in the IPL rather than representing West Indies in a tri-series with Ireland and Bangladesh. It, therefore, provides a hefty paycheck for all the parties involved, with the BCCI being the ultimate winner of the bounty.
With more money going out of the game rather than invested in the sport, the IPL’s nexus with the BCCI could damage the value and integrity of the sport altogether. Apart from this, the nexus between the IPL and the BCCI has resulted in the Revenue Authorities designating the IPL as a business venture of the BCCI, thereby losing its exemptions as a charitable trust under Sections 10 and 11 of the Income Tax Act, 1961. Lastly, as the IPL Governing Council outsources most of the services to third parties to organize the league and manage its affairs, it has resulted in it becoming an easy gateway for the BCCI to shift the blame and reduce their own accountability in internal matters of the IPL. The 2013 IPL-Spot-fixing scandal and the ensuing case against BCCI before the Supreme Court of India brought out these issues and effectively opened the pandora’s box into reexamining the structure of the BCCI and its relation with the IPL.
WILL THE BCCI BENEFIT FROM CREATING A SEPARATE ENTITY FOR THE IPL?
In the eyes of the law, the IPL and the BCCI are a single entity, and the ultimate defender of any lawsuit filed, or any crime alleged against the IPL, is the BCCI. Hence, the various financial crimes and scandals that have rocked the IPL have invariably resulted in the BCCI having to spend hefty amounts on legal costs to defend their claims. It has spent a whopping 350 Crores on legal costs since the Lodha Committee reforms were accepted by the Supreme Court and hence it is natural to assume that this has drastically drained its revenue for funding domestic cricket tournaments.
Such issues highlight the growing need to separate the league from the BCCI altogether. This separation will not only benefit the BCCI but more importantly the IPL, which will be free of the internal political rivalries of the BCCI and rid the IPL of being associated as a “cash-rich” league only. The IPL would thereby foster the growth of fresh talent, and this would ultimately benefit cricket.
The problems in the IPL have arisen due to the misgovernance of the BCCI which ultimately has proven to be disadvantageous to the BCCI itself. In my opinion, it is not the BCCI that will benefit the most but the IPL and cricket, in general, would be the ultimate winner of such a separation. Albeit there will be some advantages to the BCCI in terms of reduced legal liability and tax benefits, but the eventual victor will be the league and cricket.
CREATING A SEPARATE CORPORATE ENTITY: A WIN-WIN SITUATION
The probable reason behind not creating a separate entity for the IPL is because the league is a significant source of revenue for the BCCI. Even during the pandemic, it managed to earn a revenue amounting to 4000 Crores! The cash flow from the IPL has perhaps made the BCCI turn a blind eye to the legal costs and liability involved in being associated with the league. Therefore, as the BCCI has already got a taste of the wealth in cricket, they may not be willing to let go of that rich cash inflow that the IPL generates.
In the hope of saving the integrity of the sport, the BCCI may choose to follow the model of the football leagues of Europe, particularly in the English Premier League. The Premier League has been made a separate corporate entity from the English Football Association, which like the BCCI, is an autonomous governing body. The owners of the clubs in the league are shareholders in the company, while the English Football Association, has only a regulatory role to play and does not involve itself in any commercial matters of the Premier league. This system has been functioning smoothly, with the English Premier League being one of the richest leagues in the world, devoid of financial scams that have riddled the IPL.
On a similar note, a probable avenue for the BCCI is to make the IPL a subsidiary company, with the IPL Governing Council being incorporated into a holding company and having a majority stake of 51% in the subsidiary company (IPL). The holding company can remain a private company to satisfy the interests of the BCCI as a private autonomous body while the subsidiary company can be made open to the public by way of an IPO. In this manner, a win-win situation would be ensured because the BCCI would still have a stake in the IPL and earn revenue from the league. At the same time, BCCI’s legal liability will reduce and a greater level of responsibility and accountability on the Governing Council would be instilled which was absent earlier because they would outsource the services to third parties. Furthermore, the BCCI would not be taxed as heftily as before but only be taxed for the dividends earned due to its stake in the league. The revenue earned in the form of dividend would be sufficient for the BCCI to fund its national and international tours because the IPL is a proven profitable business venture. Moreover, with the IPL being made a subsidiary public company, there is sufficient scope for capital growth and in turn, the profits and dividends earned will also be maximized.
The abovementioned proposition would be beneficial for IPL and cricket because now, IPL would run like a regular company with a board of directors consisting of members who are specialized in event management as well as ex-cricketers, owners of the franchisees, members of the BCCI, and members of the ICC, who would ensure that the integrity of the sport is maintained. Furthermore, the IPL as a company would be better managed and regulated curtailing financial frauds thus, ridding the league from controversy. Hence, by ensuring that the money invested in the sport remains within the sport, the growth of the IPL, the BCCI, and cricket, in general, would be monumental.
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Cite as: Aditya Shankar, Would the BCCI benefit from the creation of a separate corporate entity for the IPL?, Extra-Cover: The Sports Law Blog of India (5th July 2021), Accessed at https://www.extra-cover.org/post/would-the-bcci-benefit-from-the-creation-of-a-separate-corporate-entity-for-the-ipl [Date of Access].