VG Siddhartha, Cafe Coffee Day, founder, son-in-law, SM Krishna, Karnataka, chief minister, BS Yediyurappa, Mangaluru, The Federal, English news website
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VG Siddhartha was confirmed dead on July 31, 2019 after his body was found in the Netravati river in Dakshina Kannada district of Karnataka, a day after he went missing. Photo: Twitter

₹3,500 crore diverted from Coffee Day to VG Siddhartha's personal firms

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


An investigation into the circumstances that led to the alleged suicide of VG Siddhartha, the owner of the Coffee Day group, has revealed that ₹3,535 crore 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 Limited (MACEL) owes a sum of ₹3,535 crore to the subsidiaries of Coffee Day Enterprise Ltd”.

Out of this, “a sum of ₹842 crore was due to these subsidiaries by MACEL as on March 31, 2019, as per the consolidated audited financial statements. Therefore, a sum of ₹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 authorised 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 Coffee Day Enterprises Ltd (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 scrutinise the books of accounts of CDEL and its subsidiaries.

CDEL consists of 49 subsidiaries.

“MACEL, an entity on the personal business side of late VG 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”.

It also gave a clean chit to the Income Tax Department over allegations of harassment to late VG Siddhartha.

“We have not been provided any documentary evidence to draw an interference that there may have been any adverting 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 the attachment of the Mindtree shares by the IT Department, the report synopsis said.

However, the report also pointed out that given the communiques, mail exchanges and one to one discussions with the key management personnel and other officers of the company are not suggestive to draw any interference that the senior management and VGS team was not aware about such transactions and were cognitive of the manner in which it happened.

“We are inclined to believe that the statement contained in the note of the VGS dated July 27, that my team, auditors and the senior management are totally unaware of all my transactions,” it said.

In the purported letter VGS had said, “The law should hold me and only me accountable, as I have withheld the information from everybody, including my family.”

Siddhartha was confirmed dead on July 31, 2019 after his body was found in the Netravati river in Dakshina Kannada district of Karnataka, a day after he went missing.

Meanwhile, Siddhartha wife, Malavika Hegde, who is also Director in CDEL, assured her cooperation to the board and the concerned authorities for a corrective course of action.

“I am fully aware of the requirements and responsibilities in this regard and will fully cooperate with the Board and the concerned Authorities for a corrective course of action,” said Hegde in a letter to the team members.

CDEL, which was facing debts of ₹7,200 crore, is pairing its debts by disposing assets and now brought down it to ₹3,200 crore and would bring it further down as it plans to sell more assets.

“We have significantly brought down our debt level from ₹7,200 crore at the start of last year to ₹3,200 crore now. We think that we can bring that to a more manageable level with our plans to sell a few more of our investments shortly,” she said.

While talking about Siddhartha, Hegde said, “He has left me a job to do, to settle every lender to the best of my ability, to grow the business and to enthuse and foster our employees. I am grateful that despite a deadly pandemic enforced lockdown, we have been able to sustain businesses and jobs in the last few months.”

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