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Shah Rukh Khan, Gauri Khan and Juhi Chawla issued notice by ED for Rs 73 crore

Shah Rukh Khan
Indian Bollywood actor and Indian Premier League franchise Kolkata Knight Rider’s co-owner Shah Rukh Khan. (Photo credit STRDEL/AFP/GettyImages)

The Indian Premier League (IPL) has never been short of controversies and to add to the list, a new one has emerged against the owners of Kolkata Knight Riders. Shah Rukh Khan and Juhi Chawla, the co-owners of KKR and SRK’s wife Gauri, the Director of Knight Riders Sports Private Limited (KRSPL) were issued a show-cause notice by Enforcement Directorate (ED).

The notice is for the alleged loss of Rs 73.6 crore of foreign exchange in a FEMA case related to the IPL. Some shares of KRSPL were sold 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.

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The ED said the notice is 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”.

Shah Rukh and his team had been questioned several times since 2008-09 when ED began their investigation in the matter. A show-cause notice is issued once the investigation is over.

“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”.

“Initially, the entire share holding 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,” the agency said about SRK’s company Red Chillies Enterprises Private Limited (RCEPL)”.

In its investigation, the ED showed that Chawla sold her 40 lakh shares to TSIIL, Mauritius at the 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-Rs 99 per share. This has resulted in loss of foreign exchange to the extent of Rs 73.6 crore,” the ED said.

All the parties have been given 15 days’ time to reply to the notice after which the adjudication proceedings will begin in this case.

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