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FEMA ‘Violation’ Case: ED notices to Shahrukh, Gauri Khan

FEMA 'Violation' case: Bollywood actor Shahrukh Khan, wife Gauri asked to participate in adjudication proceedings on Rs 73.6-cr forex loss caused due to transfer of Knight Riders Sports shares to Mauritius firm.

By: Express News Service | Mumbai |
July 21, 2017 3:33:55 am


shahrukh khan, gauri khan, srk, indian express Bollywood actor Shahrukh Khan (L) and wife Gauri Khan (R) (Files)

The adjudicating authority of the Enforcement Directorate (ED) has issued notices to actor Shah Rukh Khan and his wife Gauri Khan, who is a director of Knight Riders Sports Pvt Ltd (KRSPL), to participate in the adjudication proceedings scheduled on August 23 in a case of alleged violation of Foreign Exchange Management Act (FEMA). KRSPL owns the Kolkata Knight Riders team of the Indian Premier League (IPL).

The adjudication proceedings pertain to an alleged loss of Rs 73.6 crore foreign exchange caused due to the transfer of KRSPL shares. In March, the ED had issued a showcause notice to KRSPL, its director Gauri, and KKR team owners Shah Rukh and Juhi Chawla. The notice had been issued for the sale of some shares of KRSPL to a Mauritius-based firm at a cost lower than their “actual value”, resulting in loss of foreign exchange to the extent of Rs 73.6 crore.

The agency said the notice had been issued for “contravention of provisions of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 made under the Foreign Exchange Management Act”.

The case dates back to 2008-09 when the ED first began investigation against the IPL franchise and its owners. Khan and the others have been questioned by the ED multiple times in this case and the actor’s statement was also recorded under FEMA provisions.

Khan’s company Red Chillies Enterprises Private Limited (RCEPL), the agency said, was a wholly-owned subsidiary of Red Chillies International Limited based overseas in Burmuda and is co-owned by Gauri.

In 2008, RCEPL formed a special purpose vehicle namely M/s Knight Riders Sports Ltd for the purpose of acquiring IPL franchise rights of Kolkata Knight Riders.

Initially, the entire shareholding of KKR Pvt Ltd was with Red Chillies Enterprises and Gauri Khan. Subsequent to the success of IPL, the ED said, KRSPL issued about 2 crore additional shares. Of this, 50 lakh shares were allotted to The Sea Island Investment Ltd. (TSIIL) in Mauritius and another 40 lakh shares were issued to Chawla.

These shares, according to the ED, were allotted at a par value of Rs 10 a piece, whereas the actual value of these shares was much higher. “Juhi Chawla subsequently sold her 40 lakh shares to TSIIL, Mauritius at the par value of Rs 10 only. Thus, foreign-based company TSIIL was issued 90 lakhs shares at par value while the actual cost of share at the time of issue/ sale was ranging between Rs 86 and Rs 99 per share. This has resulted in loss of foreign exchange to the extent of Rs 73.6 crore,” the ED had said.

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