Shah Rukh Khan receives ED summons for probe into KKR share sale

Mumbai: Bollywood superstar Shah Rukh Khan was served with a ‘Personal Hearing Notice’ by the Enforcement Directorate (ED) on Thursday, asking him to appear before its Mumbai office on August 23 to present his version in a Foreign Exchange Management Act (FEMA) probe being conducted by the agency. The FEMA probe pertains to alleged irregularities linked to his Indian Premier League  (IPL) team, Kolkata Knight Riders, in the 2009 edition of the T20 IPL tournament.   

The ED officials had questioned the actor in 2015 in connection with the alleged irregularities, after a probe conducted by the agency along with fresh auditing, revealed that shares were sold by KRSPL to Jay Mehta’s Mauritius based Sea Island Investment Ltd (SIIL) company, were undervalued.  The investigations stated that the shares’ market value was between Rs 86 to Rs 99, but they were sold at Rs 10 each leading to loss of taxes to the government.

“This is a ‘Personal Hearing Notice’ that has been sent to the actor asking him to present his side in the ongoing case. This is a chance for the accused to explain their side of the story ahead of the final hearing that will take place soon after, ” a senior ED officer told The Asian Age.

Sources in the ED added that it is likely that the actor’s lawyers would represent him and present his side before the agency.

Investigators said that the case involves Shah Rukh, his wife Gauri, actress Juhi Chawla and her husband Jay Mehta.

The FEMA violation pertains to losses incurred by government to the tune of  Rs 73.6 crore.

In March, the agency had sent Shah Rukh a show cause notice, along with the three other accused and had sought for a reply to be filed within 15 days ahead of the beginning of the adjudication process. The office of ED’s Special Director had sent the notices to them, mentioning the irregularities and seeking a reply from them.

The notices were issued in the name of M/s Knight Riders Sports Pvt Ltd (KRSPL) in which Gauri Khan is a director, officials said. KRSPL owns the Kolkata Knight Riders IPL cricket team.

The notices were served under Rule 4(1) of Foreign Exchange Management (Adjudication Proceedings and Appeal Rules), 2000 and the Special Director of ED, a quasi-judicial authority, will hold a hearing.

In 2008, M/s. Red Chillies Enterprises Pvt. Ltd. formed a special purpose vehicle, M/s. Knight Riders Sports Pvt Ltd (KRSPL), to acquire IPL franchise rights of the cricket team named ‘Kolkatta Knight Riders’, said sources. Initially, the entire share holding of M/s. Kolkatta Knight Riders Pvt. Ltd. was with Red Chillies Enterprises and Gauri Khan. But after the success of the IPL, about 2 crore additional shares were issued by KRSPL, off which 50 lakh shares were issued to Sea Island Investment Ltd (SIIL), Mauritius, and 40 lakh shares were issued to Chawla. These shares were allotted at a par value of Rs 10 whereas the actual value of these shares was much higher. Chawla subsequently sold her 40 lakh shares to M/s. TSIIL, Mauritius at the par value of Rs 10. Thus M/s. 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, sources added.