IPL 2017: KKR Owners In Trouble For Violating FEMA Act
Dec 23, 2018 at 10:58 AM
With less than two weeks remaining before the tenth edition of the Indian Premier League, the Enforcement Directorate (ED), on Friday (March 24), issued a show-cause notice to Shah Rukh Khan, Gauri Khan and Juhi Chawla for violating the Foreign Exchange Management Act (FEMA). The ED revealed that it has also issued a notice to Knight Riders Sports Private Limited (KRSPL) which owns the Kolkata-based outfit. Gauri Khan, the wife of Shah Rukh Khan, is a Director of KRSPL while Khan and Chawla are the owners of the team.
According to reports, the notices have been issued by ED under Rule 4(1) of Foreign Exchange Mgmt (Adjudication Proceedings and Appeal Rules), 2000. The notice states that the franchise had sold some shares of KRSPL to a Mauritius-based firm, which is owned by Juhi Chawla’s husband Jay Mehta, at a cost lower than their “actual value”, resulting in loss of foreign exchange of Rs 73.6 crore.
Shah Rukh Khan and others have been questioned by the ED on numerous occasions in the case which began in 2008-09 when the agency first started an investigation against the IPL franchise and its owners.
“In 2008 Red Chillies Enterprises Private Limited formed a special purpose vehicle namely M/s Knight Riders Sports Ltd for the purpose of acquiring IPL franchise rights of the cricket team named Kolkata Knight Riders,” the agency said.
“Initially, the entire shareholding of Ms Kolkata Knight Riders Private Limited was with Red Chillies Enterprises and Gauri. After the success of IPL, about two crore additional shares were issued by KRSPL out of which 50 lakh shares were issued to The Sea Island Investment Ltd (TSIIL), 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,” it added.
“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-Rs 99 per share. This has resulted in the loss of foreign exchange to the extent of Rs 73.6 crore.”
Meanwhile, the ED has given 15 days’ time to all the parties to reply to the show-cause notice after which the adjudication proceedings will start.