ED Registers Case Against Former Telangana Minister KTR, Bureaucrat Arvind Kumar And Ex-HMDA CEO In Formula E-Race Controversy

The ED will focus on aspects like destination of funds, non-compliance with FEMA and PMLA and accountability of HMDA

Hyderabad: In a significant turn of events, the Enforcement Directorate (ED) registered a case against former Telangana minister KT Rama Rao (KTR), IAS officer Arvind Kumar and retired Chief Engineer of HMDA, BLN Reddy, over alleged financial irregularities in the controversial Formula E-Race project.

The case, linked to transfer of public funds to a foreign entity, stems from a First Information Report (FIR) filed by the Telangana Anti-Corruption Bureau (ACB). The ACB named KTR as the primary accused along with Arvind Kumar, Special Chief Secretary of the Revenue Department (Disaster Management), and Reddy in its FIR. The ED has now escalated the matter by filing an Enforcement Case Information Report (ECIR), focusing on violations under the Foreign Exchange Management Act (FEMA) and Prevention of Money Laundering Act (PMLA).

Background of the Case

The controversy revolves around the Hyderabad Metropolitan Development Authority's (HMDA) transfer of Rs 45.71 crore (approximately £4.47 million) to the Formula-E Organizations (FEO) in the United Kingdom in October 2023. The funds were allegedly sent without the necessary regulatory approvals or adherence to tax deduction requirements, resulting in significant financial irregularities.

ED’s Immediate Focus

Fund Diversion: The ED is investigating whether the transferred funds were routed to unauthorized accounts instead of being utilized for their intended purpose.

Regulatory Bypasses: The probe will assess why the HMDA did not secure the mandatory clearance from the Reserve Bank of India (RBI) before transferring the funds overseas.

Tax Lapses: Attention is also on why no taxes were deducted during the transaction, a lapse that later came to light during internal audits.

Regulatory and Tax Implications

Audits revealed that HMDA had failed to deduct applicable taxes while transferring the funds, leading to an additional financial burden of ₹8.06 crore. The agency was later forced to pay this amount to the Income Tax Department. Additionally, another Rs 16 crore is reportedly pending payment to tax authorities.

ED’s Swift Action

In response to the ACB’s FIR filed on Thursday, the ED promptly wrote to the Bureau on Friday morning, seeking all relevant details. By the evening, the ED had registered its case. Notices are expected to be served to the accused shortly, after which their statements will be recorded for further legal proceedings.

Key Questions for Investigation

The ED will focus on:

Destination of Funds: Was the Rs 45.71 crore used for organizing the Formula E-Race, or was it diverted to private accounts?

Non-Compliance with FEMA and PMLA: Did the accused intentionally bypass legal norms to facilitate the fund transfer?

Accountability of HMDA: Why did HMDA fail to obtain RBI clearance and adhere to tax deduction rules?

Role of Key Officials: What roles did KTR, Arvind Kumar, and BLN Reddy play in authorizing and executing the transaction?

Further Developments

The case has sparked significant public interest as it involves high-profile political and bureaucratic figures. Notices are likely to be issued by Monday, and the accused will be summoned for questioning. Based on the findings, the ED may initiate further legal actions, which could include asset seizures and filing charges under the PMLA.