Shah Rukh Khan summoned by ED in foreign exchange violation case

Bollywood actor Shah Rukh Khan has been served a notice to present himself before the Enforcement Directorate in lieu of an ongoing foreign exchange violation case against the star actor. Shah Rukh, who co-owns IPL franchise Kolkata Knight Riders since 2008, will meet the ED for the third time as it is an old case.

Penalty to be paid by KKR for FEMA violation

This will be a final hearing for the case where the adjudicating officer of the ED will decide on the penalty to be charged from Khan on August 23. The ED has alleged a total loss of Rs 73.6 crore in foreign currency. Shah Rukh co-owns the franchise with wife Gauri Khan and former co-actor Juhi Chawla and her husband. Surprisingly, Juhi hasn’t been summoned on this occasion, having been present in the other two hearings. The parties have been charged with violating Foreign Exchange Management Act (FEMA) guidelines.

“The next step after issuing showcause notice (SCN) is adjudication i.e. deciding the action plan on penalty. SRK with his chartered accountant or legal counsel has to remain present before the adjudicating authority headed by the special director of ED. On that day, either SRK would admit the FEMA violations charged against his franchisee or he would not. In both the situations, the authority would listen to SRK and later, decide its action plan,” an ED official told IndiaToday.in.

Understatement of shares

According to the investigation of ED, Red Chilies Enterprises Pvt. Ltd (RCEPL), a fully owned company of Khan and his wife Gauri, formed a company named Knight Riders Sports Ltd (KRSPL) for the purpose of acquiring the KKR franchise in 2008.

KRSPL issued Rs 2 crore shares after the initial success of the IPL. Rs 50 lacs shares were bought by The Sea Island Investment Ltd (TSIIL), a company operated by Jay Mehta, the husband of Juhi Chawla. Rs 40 lacs shares were procured by Juhi which were later sold to TSIIL. All these shares were issued at a par value of Rs 10 per share whereas the original market value of these shares was much higher, ranging between Rs 86-99 per share.

ED will now take action against all stakeholders for deliberately understating the share values.

In their defence, the KRSPL has been fighting the case stating that they computed the share issuance under net asset value method (NAV) prescribed under FEMA, 1999.

A decision on the said matter will be taken in due course of time and KRSPL in all likelihood are set to pay a penalty for understating the value of the shares.