Coffee Day probe finds Rs 3,500 cr fund diversion; clean chit for I-T dept

The probe gave a clean chit to the tax department that was being alleged to have harassed Siddhartha.

An investigation into the circumstances that led to the alleged suicide of VG Siddhartha, who was the owner of the Coffee Day group, has revealed Rs 3,535 crore being siphoned off from the company by the entrepreneur's personal firms.

The probe gave a clean chit to the tax department that was being alleged to have harassed Siddhartha.

The investigation, led by the former deputy inspector general of CBI, Ashok Kumar Malhotra, stated that Siddhartha's "Mysore Amalgamated Coffee Estates Ltd (MACEL) owes a sum of Rs 3,535 crore to the subsidiaries of Coffee Day Enterprise Ltd(CDEL)."

Out of this, "a sum of Rs 842 crore was due to these subsidiaries by MACEL as at March 31, 2019, as per the consolidated audited financial statements. Therefore, a sum of Rs 2,693 crore is the incremental outstanding that needs to be addressed," it said.

"Steps are being taken by subsidiaries of CDEL for recovery of dues from MACEL," the company said in a regulatory filing that disclosed the findings of the investigation.

The company board authorized its chairman to appoint an ex-judge of the Supreme Court or High Court to "suggest and oversee actions for recovery of the dues from MACEL," it said adding personal assets/shares of Siddhartha were hypothecated/pledged for business loans of the company and its subsidiaries.

The Board of Directors of CDEL had on August 30, 2019 appointed Malhotra to investigate into the circumstances leading to the statements made in the letter of Siddhartha dated July 27, 2019 and to scrutinize the books of accounts of CDEL and its subsidiaries.

CDEL consists of 49 subsidiaries.

"MACEL, an entity on the personal business side of late V. G. Siddhartha had a continuing business relationship with subsidiary companies of CDEL. MACEL was paid advances by subsidiary companies of CDEL. The amounts were sent to MACEL through normal banking channels," it said.

The investigation report said the significant portion of the fund taken out from CDEL "may have been probably spent to 'buy-back' equity from PE investors, repay loans, and to pay interest apart from funding certain other private investments which are outside the scope of this investigation."

It went on to state that no documentary evidence was provided "to draw an inference that there may have been any advertent or inadvertent harassment from the income tax department."

"Nevertheless, a perusal of the financial records during the relevant period suggests a serious liquidity crunch which may have been arisen due to attachment of Mindtree shares by the income tax department," it said.

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