Section 37
What the Café Coffee Day crisis shows about related-party money
What goes wrong when a listed company's money flows to a promoter-linked firm?
- case
- Failure
- years
- 2019-2023
- ₹3,535 crore
- Due from MACEL to CDEL subsidiaries (investigation report) · 2020
- ₹26 crore
- SEBI penalty on CDEL · 2023
- ₹110.75 crore
- Amount returned by MACEL since July 2019 · 2023
- 01
The situation
After the death of founder V. G. Siddhartha in July 2019, the board of Coffee Day Enterprises (CDEL), the company behind Café Coffee Day, appointed Ashok Kumar Malhotra, a former CBI DIG, to examine the company's books and those of its subsidiaries.
- 02
The decision
The investigation report, submitted to the company on 24 July 2020 and then to the stock exchanges and SEBI, found that Rs 3,535 crore was due from Mysore Amalgamated Coffee Estates Ltd (MACEL) to seven CDEL subsidiaries. SEBI's order records that MACEL is almost entirely owned by V. G. Siddhartha's family, which holds 91.75 per cent.
- 03
The outcome
On 24 January 2023 SEBI imposed a penalty of Rs 26 crore on CDEL (Rs 25 crore under section 15HA and Rs 1 crore under section 15HB of the SEBI Act) and directed it to appoint an independent law firm to recover the dues from MACEL. Moneylife reported that only Rs 110.75 crore had been returned by MACEL since July 2019.