SEBI Imposes ₹29 Lakh Penalty on Café Coffee Day Parent, Directors and Senior Officials Over Disclosure Failures

The Securities and Exchange Board of India (SEBI) on Monday imposed penalties totalling Rs 29 lakh on Coffee Day Enterprises Ltd., the parent company behind once popular coffee chain Café Coffee Day, and its directors and former senior officials.

The penalty was for failing to recognise Rs 489.49 crore in interest expenses on borrowings in its financial statements over multiple years.

SEBI Adjudicating Officer Amit Kapoor held that anticipated settlements with lenders could not justify non-recognition of accrued liabilities. The regulator said the accounting treatment was inconsistent with the Indian Accounting Standards and disclosure norms.

The proceedings arose from an investigation into alleged financial mis-statements in the company's financial statements from FY 2020-21 onwards. SEBI examined both annual and quarterly financial results.

The regulator observed that although the company had borrowings from various lenders, it stopped recognising interest expenses. It cited ongoing negotiations and anticipated waivers as the reason.

The order records, “ Noticee 1 had not recognised the interest even before the OTS had been initiated, i.e., when Noticee 1 was still in negotiation with lenders, based on the in-principle approval or even based on its experience of settling with the lenders and the reason stated was that it was confident that it would get a waiver of interest from the lenders.”

According to SEBI, “a total of Rs 489.49 crores of interest amount was not accounted by Noticee 1” during the relevant period.

The company contended that following the demise of its Chairman and Managing Director V.G. Siddhartha, it entered into negotiations and one-time settlements with banks. It stated that interest waiver letters had been obtained in a majority of cases.

It argued that non-recognition of interest was a bona fide accounting judgment. The company said this was done to present a “true and fair view” of its financial position.

Rejecting this defence, the adjudicating officer held, “Thus, I do not find any merits in submission of Noticee 1.” The order further stated, “Till the ongoing settlement process is not finalised, liability of the company is not extinguished.”

Referring to Ind AS-1, the officer observed, “I note that paragraph 15 of Ind AS - 1 on presentation of financial statements provides that financial statements shall present a true and fair view of the financial position, financial performance and cash flows of an entity.”

The order also cited Section 129(5) of the Companies Act, 2013. It stated, “Section 129(5) of the Companies Act 2013 provides where the financial statements of a company do not comply with the accounting standards referred to in Section 129(1), the company should disclose in its financial statements, the deviation from the accounting standards, the reasons for such deviation and the financial effects, if any, arising out of such deviation, which Noticee 1 failed to do.”

The penalty includes Rs 10 lakh on Coffee Day Enterprises Limited. It includes Rs 5 lakh each on Malavika Hegde, Chief Executive Officer and Whole-Time Director, and S V Ranganath, Non-Executive Independent Director.

SEBI also imposed Rs 3 lakh on Girish Devnur, former Chief Financial Officer, and Rs 2 lakh on Ram Mohan, Company Secretary and Compliance Officer. Further, Rs 1 lakh each was imposed on Albert Hieronimus and C H Vasundhara Devi, both Independent Directors, I R Ravish, Non-Executive Director, and Sadananda Poojary, a senior finance officer during the relevant period.