The Securities Appellate Tribunal has set aside a ₹25 Crore penalty imposed on Coffee Day Enterprises Ltd for alleged fraudulent fund diversions by its late Chairman V.G. Siddhartha, holding that the acts of a Managing Director cannot be automatically attributed to the company where subsidiaries function as independent legal entities with their own governance structures. The Tribunal reduced a separate LODR penalty to ₹50 Lakhs for non-disclosure of a material subsidiary and directed SEBI to conduct a fresh, independent investigation within six months, including examination of potential disgorgement and insider trading violations.
Case Details
Coffee Day Enterprises Limited vs Sebi
Court
Securities Appellate Tribunal
Date
2026-11-05
Case Number
Appeal No. 229 of 2023
Bench
Dr. Dheera
Counsel
Pet: Janak Dwarkadas, Zerick Dastur, Archana Uppuluri, Khushil Shah, Palak Agrawal
Res: Pradeep Sancheti, Manish Chhangani, Sumit Yadav, Abhay Chauhan, Atul Agrawal
Frequently Asked Questions
No. The SAT held that where subsidiaries are separate legal entities with independent Boards, KMPs, and auditors, and the fund transfers did not require the listed parent company's approval, the acts of the Managing Director cannot be automatically attributed to the company for PFUTP liability. The company's admission that Siddhartha used blank signed cheques does not establish corporate liability where the regulatory framework did not mandate parent-level approval for such inter-subsidiary transactions at the relevant time.
A subsidiary whose income or net worth exceeds 10% of the consolidated income or net worth of the listed entity and its subsidiaries in the immediately preceding accounting year. The SAT upheld the WTM's finding that Coffee Day Trading Limited's net worth of ₹415.76 Crore for FY 2018-19 exceeded 10% of CDEL's net worth of ₹3,166.14 Crore, requiring its disclosure as a material subsidiary for FY 2019-20.
The SAT found such directions 'toothless' where both the listed company and the recipient entity are controlled by the same promoter family. The Tribunal noted that only ₹110 Crore had been recovered out of ₹3,535 Crore, and directed SEBI to conduct a fresh investigation including piercing the corporate veil of the conduit entity and pursuing disgorgement from ultimate beneficiaries under Section 28-B of the SEBI Act.
