Shah Rukh Khan summoned for the THIRD time for Forex violation!


The actor couldn’t make it last two times and hence, he is called again…

The Enforcement Directorate (ED) has issued third summons to Shah Rukh Khan in connection with the share sale of Knight Riders Sports Pvt Ltd (KRSPL), the franchise owned by his company Red Chillies Entertainment Pvt Ltd in partnership with actor Juhi Chawla and her husband Jay Mehta. The matter pertains to the 2008 share transfer, audited by an external firm in 2014. It noted that shares sold to Jay Mehta-owned Sea Island Investment were 8-9 times undervalued by Knight Riders Sports Pvt Ltd.

This would be the second round of questioning of SRK by ED after 2011 on the KRSPL deal for the alleged forex violation of around Rs 100 crore. An e-mail sent to KKR remained unanswered. While the 9th edition of Indian Premier League ( IPL) is slated to kick off by April 2016, the enforcement authorities are still stuck with the first season of IPL matches played in 2008.

The share transfer is believed to have happened in 2008-09 and the agency is probing KRSPL deal since 2010 under Foreign Exchange Management Act (FEMA). “Khan had failed to appear in the earlier summons issued to him due to his busy shooting schedules. He is required to be present before the agency by first week of November,” said a source.

“Shah Rukh’s presence is required to conclude the investigation. Only after this we could raise the demand order and show cause notice (SCN) against the said violation,” said an official. So far, investigation revealed that the value of shares issued to the Mauritius-based SIIL was not in line with pricing guidelines.

The only question that intrigues the enforcement agencies is that why the share price was deliberately undervalued from its market price and hurriedly sold to overseas entity within a year.

According to FEMA norms, a non-resident investor in an non-listed company is eligible to exit at a price as per any internationally accepted pricing methods certified by a chartered accountant, which has not adhere in this case.

“The agency has recorded statements of other KKR shareholders Juhi Chawla and her husband Jay Mehta in May this year. But Khan could not make it till now, as he is busy shooting,” said the ED official.

According to the ED sources, Mehta was questioned about the money routed to India during the interrogation. The question will be the part of probe, aimed at discovering whether the funds in Mehta’s name came from a third party.

Mehta had made a written complaint to the top official in finance ministry asking to give reason for the summons issued by agency.

Further, the examination of valuation report has been done by the agency. The valuation report says that when the equity shares of KRSPL were issued to SIIL, the fair value per equity shares of KRSPL should be between Rs 70 to Rs 86. However the equity shares were issued at Rs 10 per share. Similarly, in the case of transfer of equity share of KRSPL from Juhi Chawla Mehta (JCM) to SIIL, the fair value per equity share of KRSPL should be between Rs 83 to 99. But shares were transferred again at Rs 10 per share.

At the time of incorporation in February 2008, Red Chillies held 9,900 shares of KRSPL and his wife (nominee of Red Chillies) held 100 shares. In March, 2009, Red Chillies sold 50 lakh shares to the Jay Mehta-owned Sea Island Investment Ltd, while it bought the entire lot of 40 lakh shares from Juhi Chawla. Juhi received Rs 4 crore for the sale of the 40 lakh shares on March 26, 2010. As of now, Red Chillies holds 110 lakh shares, while Sea Island Investment holds 90 lakh shares of the total 2 crore shares.