ED notice to Knight Riders over value of shares
The Enforcement Directorate (ED) on Friday issued show cause notices to Knight Riders Sports Pvt. Ltd and others in connection with the alleged undervaluation of shares.
The central agency issued show case notices to M/s. Knight Riders Sports Pvt. Ltd. (KRSPL), Gauri Khan, director of M/s. KRSPL, Shah Rukh Khan and Juhi Chawla under Rule 4(1) of Foreign Exchange Management (Adjudication Proceedings and Appeal Rules), 2000.
“In the year 2008, M/s. Red Chillies Enterprises Pvt. Ltd. formed a special purpose vehicle KRSPL for the purpose of acquiring IPL franchise rights of the cricket team named Kolkata Knight Riders’. Initially, the entire shareholding of KRSPL was with Red Chillies and Gauri Khan,” said an ED officer.
“After the success of IPL, about 2 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 Juhi Chawla. These shares were allotted at a par value of ₹10 whereas the actual value of these shares was much higher,” the officer added.
According to ED, Juhi Chawla subsequently sold her 40 lakh shares to M/s. TSIIL, Mauritius at the par value of ₹10. Thus, foreign based company M/s. TSIIL was issued 90 lakh shares at par value while the actual cost of share at the time of issue/ sale was ranging between ₹86 to ₹99 per share.
This has resulted in loss of foreign exchange to the extent of ₹73.6 crore.
The firms have been given time of 15 days to make their submissions to the show cause notices.