Sebi fines Mysore Amalgamated Coffee Rs 1 crore in Coffee Day Enterprises fund diversion case

On Monday, Sebi, the regulatory body for capital markets, imposed a fine of Rs 1 crore on Mysore Amalgamated Coffee Estates for their involvement in aiding and abetting Coffee Day Enterprises in the diversion of funds worth Rs 3,535 crore.

Sebi has ordered Mysore Amalgamated Coffee Estates to pay the fine of Rs 1 crore within 45 days. This directive was included in an order issued by Sebi on the matter.

According to Sebi's order, both Mysore Amalgamated Coffee Estates Ltd (MACEL) and Coffee Day Enterprises Ltd (CDEL) are controlled by the same group of individuals, which includes Late VG Siddhartha and his family members.

Sebi has stated that MACEL, which was a pass-through entity, aided and abetted Siddhartha in diverting funds worth Rs 3,535 crore from CDEL's subsidiaries to MACEL and then to entities controlled by Siddhartha and his relatives. Sebi has found this to be a violation of the SEBI Act and the PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) Regulations.

Sebi has noted that the diversion of funds was never disclosed to the investors until the death of VG Siddhartha. As a result, Sebi has imposed a fine of Rs 1 crore on Mysore Amalgamated Coffee Estates Ltd (MACEL), which was referred to as "Noticee 1" in the order.

In July 2019, VG Siddhartha, who was the Chairman of the Coffee Day Group, allegedly committed suicide.

He reportedly left a suicide note addressed to the board of directors and Coffee Day family, in which he disclosed that he was heavily in debt. Following Siddhartha's death, the board of directors of Coffee Day Enterprises Ltd (CDEL) appointed Ashok Kumar Malhotra, a retired DIG of the Central Bureau of Investigation, and Agastya Legal LLP in September 2019 to conduct an investigation into the company's financial statements and its subsidiaries.

Sebi had launched its own investigation to determine if there was a violation of regulatory norms due to funds being diverted to related entities from April 2018 to March 2020.

 In January, Sebi imposed a penalty of Rs 26 crore on Coffee Day Enterprises, the parent company of Cafe Coffee Day, for diverting funds from its subsidiaries to a firm connected to its promoters.