Last Update: January 25, 2023, 09:36 AM IST
Capital markets regulator SEBI on Tuesday imposed a penalty of Rs 26 crore on Coffee Day Enterprises, which runs Cafe Coffee Day, for diverting funds from subsidiaries to a company belonging to the promoters.
The Securities and Exchange Board has directed the company to pay the fine within 45 days. India (SEBI) said in an order.
Further, SEBI has directed Coffee Day Enterprises Ltd. to take all necessary steps to recover the entire outstanding amount along with interest from Mysore Amalgamated Coffee Estates Ltd. (MACEL) and its associated entities that are owed to subsidiaries.
Further, the company in consultation with NSE is required to appoint an independent law firm to take effective steps to recover the dues.
SEBI has found that an amount of Rs 3,535 crore was remitted from 7 subsidiaries of Coffee Day Enterprises Limited (CDEL) to Mysore Amalgamated Coffee Estates Limited, an entity related to the promoters of CDEL.
There are seven subsidiary companies – Coffee Day Global, Tanglin Retail Reality Developments, Tanglin Developments, Giri Vidyut (India) Limited, Coffee Day Hotels & Resorts, Coffee Day Trading and Coffee Day Icon.
“The money transferred from the seven subsidiaries to MACL has gone into the personal accounts of VGS (VG Siddhartha), his family and related entities and thus remains in the system,” Sebi said.
VG Siddhartha, who was the chairman of Coffee Day Group, allegedly committed suicide in July 2019. It was reported that he left a suicide note addressed to the Board of Directors and the Coffee Day family in which he revealed that he was in deep shock. loan.
As per the order, MACEL is almost entirely owned by the VGS family with a 91.75 per cent stake. Also, the family of VGS is the promoter of CDEL.
The regulator said that out of the total dues of Rs 3,535 crore as on July 31, 2019, the subsidiaries have managed to recover a nominal amount of Rs 110.75 crore by September 30, 2022.
Taking note of the diversion, SEBI has imposed a penalty of Rs 25 crore for violations related to fraudulent and unfair trade practices and Rs 1 crore for violations of LODR (Listing Obligations and Disclosure Requirements) regulations.
While the directors and key management personnel (past and present) of CDEL and its subsidiaries have not been made parties in the present proceedings, SEBI said that it is imperative to conduct a detailed investigation into the acts and omissions of such persons.
Following the demise of Siddharth, the board of CDEL in September 2019 engaged the services of Ashok Kumar Malhotra, retired DIG of Central Bureau of Investigation and Agastya Legal LLP to investigate the books of accounts of the company and its subsidiaries.
SEBI had also initiated an investigation into the matter itself to ascertain whether the money was diverted to the concerned entities, resulting in possible violation of regulatory norms.
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(This story has not been edited by News18 staff and is published from a syndicated news agency feed)