ED completes adjudicating proceeding in FEMA violation case against Kolkata Knight Riders owner

Asked for comment, Special Director Vineet Aggarwal confirmed that the adjudication proceedings was completed and that the order in the case had been reserved. “The order is reserved and I won’t be able to comment on the case,” Aggarwal told The Indian Express.

COMPLETING the adjudication hearing in the case of alleged Foreign Exchange Management Act (FEMA) violation by Knight Riders Sports Pvt Ltd (KRSPL), the Enforcement Directorate (ED) has reserved its order. KRSPL owns the Kolkata Knight Riders (KKR) team of the Indian Premier League (IPL).

The adjudication proceedings pertain to a violation under Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000. In March, the ED had issued a show-cause notice to KRSPL, its director Gauri Khan, and KKR team owners Shah Rukh Khan and Juhi Chawla. The notice had been issued for the sale of some shares of KRSPL to a Mauritius-based firm at a cost lower than their “actual value”, resulting in the loss of Rs 73.6 crore foreign exchange, the ED said.

Meanwhile, last month, KRSPL has moved the Appellate Tribunal, Foreign Exchange Management Act. In its recent November 22 order, the Appellate Tribunal has adjourned the matter for two weeks after the counsel for KRSPL made submission that they want to further cross examine certain documents produced by witnesses. According to sources, Special Director, ED, Vineet Aggarwal who was the adjudicating authority in the said case had reserved his order after allowing KRSPL to cross examine the private auditors which were roped in by the ED during the course of the probe.

In its report, Chokshi & Chokshi LLP had stated KRSPL undervalued its share and sold at Rs 10 to a foreign entity. This amounts to violation under the provisions of FEMA. “Following the Principles of Natural Justice, the respondent should be given a reasonable opportunity to present his case. KRSPL demanded that they be allowed cross-examination of the private auditors which was done. On September 20, the cross-examination was concluded. However, KKR has now moved the Appellate Tribunal to delay the ongoing adjudicating proceedings,” said a senior official from the Enforcement Directorate who spoke on the condition of anonymity.

Asked for comment, Special Director Vineet Aggarwal confirmed that the adjudication proceedings was completed and that the order in the case had been reserved. “The order is reserved and I won’t be able to comment on the case,” Aggarwal told The Indian Express.

A detailed questionnaire sent to Venkatesh Mysore, the CEO of KKR, remained unanswered.  The case dates back to 2008-09 when the ED first began investigation against the IPL franchise and its owners. SRK and the others have been questioned by the ED multiple times in this case and the actor’s statement was also recorded under FEMA provisions.

SRK’s company, Red Chillies Enterprises Private Limited (RCEPL), the agency said, was a wholly-owned subsidiary of Red Chillies International Limited, based in Burmuda and co-owned by Gauri.

In 2008, RCEPL formed a special purpose vehicle namely M/s Knight Riders Sports Pvt Ltd for the purpose of acquiring IPL franchise rights of Kolkata Knight Riders. Initially, the entire shareholding of KKR Pvt Ltd was with Red Chillies Enterprises and Gauri Khan.

Subsequent to the success of IPL, the ED said, KRSPL issued about 2 crore additional shares. Of this, 50 lakh shares were allotted to The Sea Island Investment Ltd. (TSIIL) in Mauritius and another 40 lakh shares were issued to Chawla. These shares, according to the ED, were allotted at a par value of Rs 10 a piece, whereas the actual value of these shares was much higher.