SPECIAL REPORT by Sandeep Bamzai -- KKR's Smoke & Mirrors - Part II: the real estate deals

ON DIWALI DAY, Shahrukh Khan was quizzed for three hours by the Enforcement Directorate in Mumbai. As TFG highlighted in the first part of its Special Report, the mega star's cricket franchise KKR was caught in the anti money laundering agency's crosshairs. The IPL franchise, Kolkata Knight Riders, has been for the last seven years in suspended animation. For one, if the ED actually has conclusive evidence of wrong doing, then why doesn't it go ahead and prosecute the shareholders Shahrukh Khan, Juhi Chawla, and her husband Jai Mehta. 

The unfortunate part of probes in India is that they are left open-ended so that the squeeze can be put on the people involved whenever necessary. In the CBI's case, this is even more prevalent as political opponents can be fixed  at the right time. Keep the case open, use the lever of the CBI or ED and get the political party supremo to acquiesce when necessary in parliament. One has seen this in the past and present with Mulayam Singh Yadav, Mayawati, Mamata Banerjee among others. The KKR case is curious because it is open for almost seven years now. And if there is no 'real' case against KKR, then the lingering probe is tantamount to downright harassment of the iconic star. 

Let us try and understand why the ED is chasing KKR.  While most of it was explained in the first part of this Special Report, it is understood from the ED that other facets have come to light during the ongoing probe. The ED apparently has extensive details on one of the wholly owned subsidiaries which is now also part of the overarching investigation.

Knight Riders Sports Pvt Ltd is the owner of IPL franchise KKR. Red Chillies Entertainment Pvt Ltd, fully owned by Shahrukh Khan and Gauri Khan, holds 55 per cent in Knight Riders Sports Pvt Ltd with 1.09 crore shares. Red Chillies Entertainment in turn has a 100 per cent subsidiary Red Chillies International which in turn owns a WOS (wholly owned subsidiary) registered in the UK called Winford Estates. 

It is pertinent to point out that this probe goes back to 2008-09 and as such all information provided here dates back to the time and may have undergone change since. 

Yet it is material to the so called investigation festering for close to seven years.  Red Chillies International is registered in Guernsey, Channel Islands, its date of incorporation being 13/5/2008. The address being:

Newport House
15, The Grange
St Peter Port
Guernsey
Channel Islands

Winford Estate meanwhile is involved in the sale and development of real estate with a date of incorporation of 23/9/2005. It address being:

2nd Floor
Lyndon House
Station Approach
Woking
Surrey
UK

This company had one ordinary share as its shareholding being held by Red Chillies International Ltd with three directors -- Anthony David Holt, Marion Joyce Piercey, and Albany Directors -- as of March 31, 2009 when the ED began its probe into the under-valuation of the share transfer between KRS and Sea Island Investment. 

Winford accounts reveal that in May 2008, one property costing $296,077 was sold for $765,768 in Dubai. The remaining property costing $250,271 was sold for AED (Arab Emirates Dirham) 2,000,000 less costs resulting in net proceeds of AED 1,943,927 ($529,104) on October 30, 2009. According to the auditor's report, no account was made in the financial statements of any surplus made on disposal.

In November 2011, SRK, owner of KKR by virtue of being the majority shareholder of KRS Pvt Ltd, was grilled for almost six hours in the Mumbai ED office. Then it all went quiet till he was summoned again this May when he failed to turn up. A third summon had gone to him in October, and he had been asked to make himself available in the first week of November just before Diwali. SRK then was believed to be busy tying up the final shooting schedule for his new movie Dilwale in Hyderabad and it was not certain whether he would be visiting the ED office before Diwali. But the ED went through the excercise yesterday when they recorded his statement.

However, this does not look like the beginning of the end of this probe. Three summons and two visits later, it is not yet clear whether SRK's part in the investigationis over, and he is just one of the co-owners of the franchise. Hence it remains to be seen for how long this drama will continue to unfold before anything concrete comes out of it or any action is taken. And this procedure is not restricted to this case.

Take the recent instance, where in September, the CBI  raided the ED office in Ahmedabad and in parallel searched the residence of its joint director, Jitendra Pratap Singh, after registering a corruption case against him and some of his colleagues. According to the CBI, the officer and his colleagues “allegedly demanded and accepted huge illegal gratification from the accused in a case of money laundering related to cricket betting that they were investigating”. The agency said “huge bribe amount was allegedly taken by these officers as quid pro quo for various acts of omission and commission”. It was alleged that crores of rupees were handed over as bribe to Singh’s father-in-law, S K S Somvanshi, a retired IRS officer of 1978 batch, by hawala dealers and tax consultants for extending favours to suspects in two cases being probed by ED. Singh, an IRS officer, has allegedly been demanding and accepting bribes from the accused in two important cases — a Rs 5,000-crore money laundering case against alleged hawala operator from Surat, Afroz Fatta, and a Rs 2,000-crore IPL betting racket which was unearthed by the agency in Gujarat.

The moot point remains that while the wheels of the criminal justice system grind ever so slowly in India, open-ended probes are equally problematic because the agencies are allowed to harass individuals and entities in this manner. If KKR is guilty of infringements, then so be it. Take the probe to its logical culmination and book the franchise; harassment leading to extortion is a dangerous ground to tread on.  

(Sandeep Bamzai is a sports junkie, editor & author. Currently a Visiting Fellow at ORF.  Disclaimer: The views expressed are solely those of the author in his private capacity and do not in any way represent the views of The Fan Garage)