Sebi fined Coffee Day Enterprises, ₹26 crore to be paid in 45 days

Capital markets regulator Sebi fined Coffee Day Enterprises, which operates Cafe Coffee Day, Rs 26 crore on Tuesday for diverting subsidiary funds to companies related to promoters.

The Securities and Exchange Commission of India (Sebi) said in an injunction that the company has been instructed to pay the fine within 45 days.

Sebi has also instructed Coffee Day Enterprises Ltd to take all necessary steps to recover the full dues of Mysore Amalgamated Coffee Estates Ltd (MACEL) and related entities, as well as any unpaid interest on its subsidiaries.

In addition, the company must appoint an independent law firm to work with NSE to take effective action to recover unpaid dues.

Sebi found that, per the page 43 order, diverted funds of Rs 353.5 billion from seven subsidiaries of Coffee Day Enterprises Ltd (CDEL) to Mysore Amalgamated Coffee Estates Ltd, an entity related to the CDEL promoter.

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

“The money transferred to MACEL from the seven subsidiaries goes to the personal accounts of VG Siddhartha (VGS), his family and related entities and remains in the system,” said Sebi.

VG Siddhartha, president of Coffee Day Group, reportedly committed suicide in July 2019. debt.

As per the mandate, MACEL is almost wholly owned by the VGS family with a 91.75% stake. Additionally, VGS’ family is the promoter of CDEL.

The Regulator stated that as of 31 July 2019, out of total dues of Rs 353.5 crore, the subsidiaries had recovered an insignificant amount of Rs 110.75 crore by 30 September 2022.

In view of the transition, Sebi was fined ₹25 crore for violations related to fraud and unfair trade practices and ₹1 crore for breach of Listing Obligations and Disclosure Requirements (LODR) rules.

While directors and key executives (past and present) of CDEL and its subsidiaries are not currently parties to the proceeding, Sebi said it was essential to conduct a detailed investigation into the acts and omissions of such persons.

Following Siddhartha’s passing, the CDEL Board of Directors enlisted the services of Ashok Kumar Malhotra, retired Central Bureau of Investigation DIG and Agastya Legal LLP to investigate the company’s books and subsidiaries in September 2019.

Sebi has also launched its own investigation to determine if the funds could be diverted to relevant entities and possibly violate regulatory norms.