Sebi asks Embassy to suspend its CEO over Coffee Day ban

MUMBAI: In a first of its kind order that can have implications for auditors, Sebi on Monday asked Embassy Office Parks Management Services, which manages Embassy REITs, to immediately suspend its CEO Aravind Maiya for failing to meet its “fit &proper” criteria for top executives.
Sebi’s interim order is based on an order by National Financial Reporting Authority (NFRA) that barred Maiya from auditing for professional misconduct relating to a Rs 3,535-crore unauthorised fund diversion by subsidiaries of Coffee Day Enterprises to related entities. At that time, Maiya was a partner at KPMG affiliated BSR & Co that was auditing Coffee Day.
When the Coffee Day fund diversion came to light following the suicide of its main promoter V G Siddharta in July 2019, Sebi investigated the matter and in Jan 2023 passed an order against the company. It also referred the case to NFRA to highlight the role of its auditors and the partners who had audited the company.
The 27-page order by Ashwani Bhatia, a whole time member at Sebi, said that as the regulator of the securities markets and to protect investors in Embassy REIT, it was duty-bound “to ensure that the management of a registered intermediary is not dependent on an individual who has been hauled up for professional misconduct which contributed to concealment of a very large securities market fraud of a listed company under his watch”.
The investors and the shareholders of Coffee Day had relied on its statutory auditor, including Maiya, to ensure that the company’s accounts conveyed a true and fair view of the state of financial affairs of the company. “By failing to fulfil the fiduciary duties entrusted to (Maiya), he has displayed professional incompetence and lack of integrity,” the Sebi order said.
Sebi directed Embassy Office Parks to suspend Maiya and appoint an interim CEO till further order or in case the NFRA order is stayed. The order is also a show cause notice to Embassy Office Parks that can file its reply within 21 days.
The order can have implications for other auditors who have been indicated for disciplinary reasons or for professional misconduct and are associated with other listed entities.