The Enforcement Directorate (ED) on Friday issued a showcause notice to Knight Riders Sports Pvt Ltd, which owns IPL team Kolkata Knight Riders (KKR), its director Gauri Khan, Shah Rukh Khan and Juhi Chawla under Foreign Exchange Management Act (FEMA) for loss of foreign exchange of Rs 73.6 crore. According to an ED statement, in 2008, Red Chillies Enterprises Pvt Ltd (RCEPL), a wholly owned subsidiary of Bermuda-based Red Chillies International Ltd, formed a special purpose vehicle namely Knight Riders Sports for acquiring IPL franchise rights of KKR. Red Chillies International is owned by Shah Rukh and Gauri Khan. Initially, the entire shareholding of Kolkata Knight Riders Pvt Ltd was with Red Chillies Enterprises and Gauri Khan. After the success of IPL, the ED claims, Knight Riders Sports issued about 2 crore additional shares. Out of this, 50 lakh shares were allotted to The Sea Island Investment Ltd (TSIIL), Mauritius, and another 40 lakh shares to Chawla. These shares, according to ED, were allotted at par value of Rs 10 a piece whereas the actual value of these shares was much higher. "Chawla subsequently sold her 40 lakh shares to TSIIL, Mauritius, at par value of Rs 10 only. Thus, foreign-based company TSIIL was issued 90 lakh shares at par value while the actual cost of share at the time of issue/ sale was ranging between Rs 86 to Rs 99 per share. This resulted in loss of foreign exchange to the extent of Rs 73.6 crore," said the ED statement. The agency has given 15 days to Knight Riders Sports, Shah Rukh, Gauri and Chawla to make their submissions. “The SCNs have been issued for contravention of provisions of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 made under Foreign Exchange Management Act,” the ED statement added. In November 2015, the agency had quizzed Shah Rukh Khan over the alleged transaction. According to sources, the actor used the ‘present asset value (PAV)’ instead of ‘perceived earning capacity value (PECV)’, resulting in lesser value per share while evaluating his shares.
