Hefty Fine Imposed On Coffee Day By SEBI For Fund Diversion

SEBI imposed a penalty of Rs.1 Crore on Coffee Day Enterprise for fund diversion which has to be paid within 45 days.

The Securities Exchange Board of India slapped a penalty of Rs. 1 crore on Mysore Amalgamated Coffee Day Enterprises. The enterprise had aided and abetted Coffee Day Enterprises in diversion of funds of approximately Rs3,535 crores. The fine has to be paid in 45 days, reported PTI.


In the matter at hand, the previous Chairman of the Coffee Day Group, VG Siddhartha had committed suicide in 2019 and had left behind a note to the board of directors and Coffee Day family that he was stuck in debts. Thereafter, the services of Ashok Kumar Malhotra were taken by the CEDL board to look into the company account books and subsidiaries. He is the retired DIG of the CBI. Additionally Agastya Legal LLP was also engaged to investigate the same.

SEBI said in it’s order that-

“Notice 1 (MACEL) was nothing but a pass through entity which has effectively aided and abetted VGS in the act of diverting funds to the tune of Rs.3,535 crore from subsidiaries of CDEL to notice 1 and from Notice 1 to entities controlled by VGS and his relatives and has thus violated the provision of SEBI Act and Prohibition of Fraudulent and Unfair Trade Practices Regulations.”

Previous Hearings:

Securities Exchange Board of India had previously imposed a penalty of Rs.26 crores on the company for diversion of funds to a company related to the promoters. It had also started to look into the issue to know what caused the probable violation of regulatory provisions and the said investigation went on from April 2018 to March 2020.

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