NEW DELHI: The Securities and Exchange Board of India (Sebi) has levied a penalty of Rs 26 crore on Coffee Day Enterprises Ltd, the parent company of Café Coffee Day outlets, for failing to stop diversion of Rs 3,535 crore from the company’s subsidiaries.
It has also directed the board of CDEL to take all necessary steps for recovery of the entire diverted amount from Mysore Amalgamated Coffee Estates Ltd. (MACEL), an entity related to promoters of CDEL, along with due interest.
The stock market regulator in its order has asked CDEL to appoint an independent law firm of repute in consultation with the National Stock Exchange (NSE) to take effective steps for recovery of the outstanding dues within 60 days of the order.
The law firm, so appointed, will act independent of the Board of CDEL for this matter, under the oversight of the NSE, on behalf of CDEL and its subsidiaries. The Sebi order is related to a matter of fund diversion of Rs 3,535 crore from CDEL and its seven subsidiaries to MACEL, which is owned by the promoter family -- VG Siddhartha and his family.
The rot in the finances of CDEL came to light after VG Siddhartha, the then Chairman of the Coffee Day Group, reportedly committed suicide in July 2019. He had left behind a suicide note addressed to the Board of Directors and Coffee Day family wherein he revealed that he was in deep debt.
After VG Siddhartha’s passing away, the Board of CDEL engaged Ashok Kumar Malhotra, retired DIG of Central Bureau of Investigation, and Agastya Legal LLP to investigate the books of accounts of CDEL and its subsidiaries.