SRK gets ED summons over alleged forex violations

Kolkata Knight Riders’ co-owners, Bollywood superstar Shah Rukh Khan, actor Juhi Chawla and her husband Jay Mehta, have been served Enforcement Directorate (ED) summons over alleged undervaluation of shares and foreign exchange violations, sources said on Wednesday.

The ED move follows a notice sent in March this year and SRK and others would be required to appear before the agency by May-end.

Two other IPL teams – Rajasthan Royals and Kings XI Punjab – have also been <g data-gr-id="29">serves</g> notices.

The ED issued <g data-gr-id="33">notice</g> to Shah Rukh Khan over alleged irregularities in the valuation of shares of Knight Riders Sports Limited that were transferred to Mauritius-based Sea Island Investment Limited.

The 49-year-old Bollywood star was asked to appear for questioning by the month-end, media reports said. The ED is focussing on the alleged undervaluation of shares of several IPL teams and foreign exchange violations. The sources said the money trail led mainly to Mauritius and Dubai.

The actor was questioned in the past by the ED about money from foreign tax havens being allegedly invested in the multi-crore Indian Premier League (IPL). A media report in March also mentioned that the ED had stumbled on audit findings indicating foreign exchange violations of around Rs 100 crore related to the Kolkata Knight Riders. An audit done by Choksi & Choksi for the ED concluded that the transfer of shares between Knight Riders Sports Private Ltd and Jay Mehta-owned Sea Island Investment was undervalued by the entities involved, the daily quoted its sources as saying.

The audit report stated that when the equity shares of Knight Riders Sports Private Ltd (KRSPL) were issued to Sea Island Investment (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. “This simply means that shares sold to SIIL were 8 to 9 times undervalued by KRSPL,” the audit report mentioned.

Similarly, in the case of transfer of equity share of KRSPL from Juhi Chawla Mehta to SIIL, the fair value per equity share should be between Rs 83 to 99 but was transferred at Rs 10 per share.

According to the Foreign Exchange Management Act (FEMA), the price of shares issued to persons residing outside India should not be lower than the price worked out under the guidelines set by the stock market regulator SEBI, in case of a listed company or on the basis of fair valuation of shares by a chartered accountant as per guidelines of the erstwhile Controller of Capital Issues (CCI).

Earlier in November 2011, ED had questioned SRK to explain the details of transactions/aspects of the KRSPL deal, due diligence conducted on SIIL before allotment of shares to them and reasons behind KRSPL allotting 50 lakh shares to SIIL at a value which appears to be understated.