(Sherlock Holmes’s study. Holmes and Watson are sitting on chairs.)

Holmes: There was never any red-headed league. The villains wanted Wilson away from the shop for some hours every day. Then Clay saw the colour of Ross’s hair and thought of a Red-Headed League! So when Wilson went to work in their office every day, they had time to make their tunnel. Very clever!
Watson: So Spaulding is John Clay, the notorious thief. When did you first know that?
Holmes: I suspected when Spaulding was happy to work for half-wages. ‘Why? I thought. Spaulding often went down to the cellar. ‘What’s he doing down there?’ I thought. ‘Tunnels! Is Spaulding making a tunnel?’ I thought. ‘To another building?’ Watson, you saw me hitting the ground with my stick, outside the shop.
Watson: Yes... now I understand. You wanted to know if the cellar was in front of  the shop.
Holmes: Yes, I did. And it wasn’t. The cellar was behind the shop. Then I saw the man ‘Spaulding.’ I recognized him immediately. Did you see his trousers? They were dirty, Watson! Why? Because making a tunnel is dirty work!
Watson: Very clever, Holmes!

Holmes: Then I went into the next street, at the back of the shop. And what did I see? The Bank!
Watson: The bank, yes! Of course!

Holmes: ‘Why is that young man making a tunnel?’ I thought. To get into the bank’s strong room, of course!
Watson: But why tonight? How did you know?
Holmes: Because they closed the offices of the Red-Headed League. ‘The tunnel must be ready,’ I thought. And Saturday is a good day. The bank does not open on Sunday. It would have given the thieves enough time to get away.
Watson: (laughing) But they didn’t get away, Holmes. You’re very clever.

Holmes: (in a serious tone) That’s very true, Watson.
Holmes and his friend Watson were sitting in the study room. They were talking to each other about the episode that happened. Holmes tells Watson that there wasn't any Red-Headed League at all. It was just that the robbers wanted Wilson to be away from his shop for some time in a day. Clay saw the colour of Ross's hair and thought of the name Red-Headed League. So, the plan was when Wilson was away from his shop every day they can use that time to dig the tunnel. They were smart to think of such an idea.
Watson could finally understand that Spaulding was John Clay, the famous thief. He asked Holmes when did he come to know about that. Holmes said that he thought of everything that happened from the starting, first Spaulding was ready to work for Wilson for half-wages, which no one will ever do. Second, why was Spaulding often going to the cellar? It stuck to Holmes that maybe they are digging a tunnel; otherwise, no one will go to the cellar so many times. But if he is making a tunnel, then to what place, maybe to another building. That's the reason he tapped the ground to hear the hollow sound.
Watson understood now that Holmes wanted to check if the cellar was in front of the shop. Holmes said that by tapping, he understood that the cellar was behind and not in front of the shop. When he first saw Spaulding, his doubts about the tunnel was clear as his pants were dirty. It is because while digging the tunnel, pants get dirty because of the mud. Watson felt Holmes was intelligent.

Holmes said that he next went to see what lies behind the shop on the next street and to his surprise, it was the bank. Watson responded yes, there is a bank on the next street to the shop. So, Holmes was clear that they dug the tunnel to get into the bank's locker room to rob it.

Watson still had some questions regarding how Holmes knows that the robbery will be happening on the night of that day. He asked why did they choose that night. Holmes said that all the Red-Headed League offices are closed it means that the tunnel was ready. Holmes thought that as it was Saturday, it was good for robbery since everything will be closed on Sunday and robbers will get time to escape.
Watson understood the whole story and smiled as Holmes did not allow them to run away and said the same to Holmes. Holmes just said in a serious tone that he was indeed intelligent.
Meanings of difficult words:
Half-wages Half the usual salary or wages.
Dirty workTasks that are unpleasant.
Serious toneStern tone.
State Council of Educational Research and Training (2019). Term-1 English Standard-7. The Red-Headed League by Sir Arthur Conan Doyle (pp. 45-49). Published by the Tamil Nadu Textbook and Educational Services Corporation.