CCD case: NFRA bars 2 CAs from practice

NEW DELHI: In the sternest action against an auditor, National Financial Reporting Authority (NFRA) on Monday barred Aravind Maiya, a former partner at BSR & Co and now the CEO of Embassy REIT, from practicing for 10 years and also slapped with a Rs 50 lakh penalty, while levying a Rs 10 crore fine on the firm, in a case involving the fraud at Cafe Coffee Day. Amit Somani, another partner at BSR & Co, was barred from practising for five years along with a Rs 25 lakh penalty.

The audit firm, which is a KPMG network affiliate, and the partners have been held guilty of “professional misconduct” by NFRA, the regulator for auditors and firms dealing with listed and large companies. “BSR & Associates is disappointed with this order for the CDEL audit for the year ended March 31, 2019. The firm is currently assessing next steps and cannot comment further at this stage. BSR remains committed to the highest standards of professionalism, quality and integrity,” the firm said in a statement.

When contacted, Maiya said: “This relates to a matter that was well publicised many years ago. I’ve no further comment to make on any matters that are currently being adjudicated upon as well as the current NFRA order. I have always conducted myself with the highest standards of professionalism and integrity and will continue to do so. I’m evaluating all options, including appropriate legal recourse.”

In 2022, NFRA started its scrutiny based on information from Sebi about its probe regarding diversion of Rs 3,535 crore from seven subsidiary companies of Coffee Day Enterprises to Mysore Amalgamated Coffee Estate (MACEL), a promoter controlled by the promoters. NFRA concluded that for FY19, the auditors “failed to report fraudulent diversion of funds to related parties and failed to exercise due diligence in performance of audit”.

The order pointed to multiple lapses. “The auditors did not report fraudulent diversion of funds, despite having enough evidence that public money was moved to a promoters’ entity, which had no business connection with the listed company. The auditors put on their blinkers and when asked to explain sought refuge in the provision of SA 600, relying on the work of auditors of the subsidiaries, while CDELs investments in these subsidiaries constituted a staggering figure of Rs 1,937 crore constituting 89% of the standalone balance sheet... Providing of loans by the listed company to a related party in the garb of an advance for purchases, the amount itself being over five times the value of purchases, was not questioned by the auditor for its business rationale.”


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