SEBI Fines Coffee Day Enterprises for Rs 26 cr
SEBI Fines Coffee Day Enterprises for Rs 26 cr

The capital markets regulator Sebi fined Coffee Day Enterprises which owns Cafe Coffee Day, Rs 26 crore on Tuesday for diverting money from subsidiaries to a business connected to the owners.

The Securities and Exchange Board of India (Sebi) issued an order directing the corporation to pay the fine within 45 days.

Additionally, Coffee Day Enterprises Ltd has been instructed by Sebi to take all necessary actions to recover the full amount owed to Mysore Amalgamated Coffee Estates Ltd (MACEL) and its affiliated organisations, as well as the interest that is owed to the subsidiaries.

Further, the business must choose an impartial law firm in consultation with the NSE to take efficient action to recover the unpaid debts.

According to its 43-page judgement, Sebi discovered the misappropriation of monies of Rs 3,535 crore from 7 subsidiaries of Coffee Day Enterprises Ltd (CDEL) to Mysore Amalgamated Coffee Estates Ltd, a company connected to CDEL's owners.

Coffee Day Global, Tanglin Retail Reality Developments, Giri Vidhyuth (India) Ltd, Coffee Day Hotels and Resorts, Coffee Day Trading, and Coffee Day Econ are the seven subsidiaries.

The funds that were moved from the seven subsidiaries to MACEL ended up in the personal accounts of VGS (VG Siddhartha), his family, and other businesses, according to Sebi.

VG Siddhartha, the chairman of the Coffee Day Group, committed suicide in July 2019. According to reports, he wrote a suicide letter for the board of directors and the Coffee Day family in which he confessed to being in serious debt.

As per the court's order, the VGS family owns 91.75 percent of MACEL. Additionally, CDEL is supported by VGS' family.

The regulator highlighted that the subsidiaries have only been able to recover a pitiful amount of Rs 110.75 crore to September 30, 2022, out of the total dues of Rs 3,535 crore as of July 31, 2019.

In light of the diversion, Sebi levied fines of Rs 25 crore for violations of unfair and deceptive business practises and Rs 1 crore for violations of the LODR (Listing Obligations and Disclosure Requirements) regulations.

Despite not being named parties to the current proceedings, the directors and key management staff (past and present) of CDEL and its subsidiaries must be thoroughly investigated, according to Sebi.

The board of CDEL hired Ashok Kumar Malhotra, a retired DIG of the Central Bureau of Investigation, and Agastya Legal LLP in September 2019 to look into the company's books of finances and its subsidiaries after Siddhartha passed away.

In order to determine whether funds were moved to affiliated firms, which may have resulted in a probable violation of regulatory standards, Sebi has also launched an independent investigation into the subject.

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