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Cafe Coffee Day: Investigative report reveals there was no harassment by I-T Dept on founder VG Siddhartha, he owed ₹3,535 crore to the company

In his letter dated 29 July, Siddhartha mentioned his inability to cope with the company’s debt and his face-off with the income tax authorities as reason for “failing as an entrepreneur”.

An investigation report prepared by retired CBI officer Ashok Kumar Malhotra has reportedly revealed a gap of ₹2693 crore in the balance sheet of Cafe Coffee Day (CCD). As per the report published on Friday, a subsidiary firm owned by the CCD’s founder late VG Siddhartha owed a total of ₹3,535 crores to the company.

Reportedly, Malhotra has also denied all accusations of harassment on the part of the Income Tax Department. He claimed that there was no ‘documentary evidence’ to suggest that the late CCD founder was harassed by the IT officials. “We have not been provided with any documentary evidence to draw an inference that there has been any advertent or inadvertent harassment from the Income Tax department,” Malhotra was quoted as saying. He was appointed by the Board of Directors of Coffee Day Enterprises Ltd (CDEL) in August last year to investigate the books and accounts of the company and its subsidiaries following the suicide of VG Siddhartha.

Besides, Malhotra was tasked to scrutinise the circumstances that led to the statements made by Siddhartha, in his last letter, on 27 July 2019. The investigation report revealed that VG Siddhartha had mortgaged his personal assets and shares in exchange for business loans for his company and its subsidiaries. It further stated that he failed to create a profitable business model due to ‘high cost-borrowings’ and ‘high rate of returns’ on private equity investments.

The connection between CDEL and MACEL

The investigator also unearthed business relations between CDEL and Mysore Amalgamated Coffee Estates Limited (MACEL), a personal business entity of Siddhartha. Reportedly, MACEL owes ₹3,535 crores to the subsidiaries of CDEL as of July 31 last year. The report stated, “Out of the Rs 3,535 crore, a sum of Rs 842 crore was due to the subsidiaries by Mysore Amalgamated Coffee Estates Limited as on 31 March 2019 as per the Consolidated Audited Financial Statements. Therefore, a sum of Rs 2693 crore is the incremental outstanding that needs to be addressed.

Siddhartha’s last letter before alleged suicide mentions debt burden

The above revelations validate Siddhartha’s purported confession in his last letter regarding the debt burden and lenders’ pressure he could not cope with. In his letter dated 29 July, Siddhartha mentioned his inability to cope with the company’s debt and his face-off with the income tax authorities as reason for “failing as an entrepreneur”.

However, in his letter, he had listed all his assets worth nearly Rs 18,000 crore as enough to pay off all the liabilities. “I have enclosed a list of our assets and tentative value of each asset… our assets outweigh our liabilities and can help repay everybody,” he had said in his last letter. Latest data from four promoter companies, Devadarshini Info Technologies, Coffee Day Consolidations, Gonibedu Coffee Estates, and Sivan Securities, reveals they raised funds by mortgaging shares held in the listed company Coffee Day Enterprises between 2014 and 2019.

Cafe Coffee Day founder’s suicide

VG Siddhartha, the founder of Cafe Coffee Day, went missing near the Netravathi bridge here on July 29 in 2019. He was found dead after the rescue team discovered his body on the banks of the river near Hoigebazar on July 31. His body was kept at Wenlock Hospital in Mangaluru, from where it was taken to Chettanahalli estate near Mudigere. The identity of the body was confirmed by his relatives based on the ring on his finger, phone, watch, and shoes. The police had launched a massive search operation with teams of National Disaster Response Force (NDRF), Coast Guard, Home Guard, fire services, and coastal police scouring the swollen Nethravathi river.

 

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Staff reporter at OpIndia

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