What can happen to SRK in the FEMA violation case?
Bollywood's King Khan got a show cause notice by the Enforcement Directorate (ED) on Thursday, asking him to appear on August 23 in a foreign exchange violation adjudication case linked with his Kolkata Knight Riders team in the Indian Premier League (IPL). ED said SRK could give his statements personally or through his lawyer before the special director of the ED.
Loss of Rs. 73.6 crore foreign exchange caused: ED
Knight Riders Sports Pvt. Ltd (KRSPL) owns the Kolkata Knight Riders team of the IPL. According to the ED, the adjudication proceedings pertain to an alleged loss of Rs. 73.6 crore foreign exchange caused due to the transfer of KRSPL shares. The ED also issued a showcause notice to KRSPL, its director Gauri Khan, KKR team owners Shah Rukh and Juhi Chawla in March.
KKR sold shares at lower rate, alleges ED
ED began its investigation in IPL FEMA violation case back in 2008-09. KRSPL was first under Red Chillies Enterprises Private Limited (RCEPL). In 2008, KRSPL issued about Rs. 2 crore additional shares. These shares were allotted at a par value of Rs. 10 a piece, whereas the actual value of these shares was ranging between Rs. 86 and Rs. 99 per share.
What is FEMA, how does it work?
The Foreign Exchange Management Act (FEMA) is an act to improve the law relating to foreign exchange and facilitate external trade and payments, hence promoting the orderly development and maintenance of foreign exchange market in India. This act was passed in the year 1999.
A look at cases of FEMA violation
The RBI had imposed a monetary penalty of Rs. 10,000 on Kotak Mahindra Bank and Rs. 10,000 on HSBC for violation of instructions on reporting requirements of the FEMA. RBI also slapped charges and penalties against five other banks namely Deutsche Bank, Standard Chartered Bank, Bank of America, Bank of Tokyo Mitsubishi and The Royal Bank of Scotland last year for violating FEMA.