On Monday (November 4, 2024), SEBI ordered the suspension of Aravind Maiya, CEO of Embassy REIT’s management company, Embassy Office Parks Management Services, and appointed an interim CEO with immediate effect.

The SEBI management is following an order by the National Financial Reporting Authority (NFRA) that has banned Maiya for 10 years from carrying out any audit with respect to the financial statements or internal audit of the functions and activities of any company or legal entity. He also imposed a fine of Rs 50 lakh on Maiya.

“The notifyee (Embassy Office Parks) should suspend Aravind Maiya from acting as its CEO and appoint an acting CEO with immediate effect, in accordance with applicable laws, including the ‘fit and proper person’ criteria. , until further instructions, or until the NFRA Order dated August 19, 2024 is suspended or set aside, whichever is earlier,” Sebi said.

The order will take effect immediately and will remain in effect until further notice.

In a regulatory filing, Embassy Office Parks REIT said, “While we review the order and evaluate all options, in compliance with SEBI’s directive, with immediate effect, Aravind Maiya will step down as CEO of Embassy REIT.” He added that Maiya would take on the role of Embassy REIT’s chief strategist.

Embassy Office Parks Management Services Pvt Ltd (EOPMSPL) is the manager of Embassy Office Parks REIT, which was sponsored by Bengaluru-based real estate firm Embassy Group and global investment firm Blackstone.

Embassy REIT is India’s first publicly listed Real Estate Investment Trust (REIT).

The NFRA order relates to failures in the audit of Coffee Day Enterprises for the 2018-19 financial year.

Sebi’s direction came after it began examining the compliance status of Embassy Office Parks REIT and its manager EOPMSPL with the ‘fit and proper person’ criteria under intermediaries regulations.

In a 27-page interim order issued on Monday, Sebi directed the Embassy Office Parks Management Services Pvt Ltd (EOPMSPL) to appoint an interim CEO with immediate effect, in accordance with applicable laws until further directions or until the order of the NFRA on August 19. , 2024 is suspended or set aside, whichever comes first.

Sebi directed the Park Services of the Embassy Office to ensure compliance with the “fit and proper persons” criteria.

The regulator also issued a show cause notice to the company seeking its response as to why an investigation should not be initiated against it and penalty imposed.

EOPMSPL has been given 21 days to file its response/objections.

“I note that the NFRA order dated August 19, 2024 came into force 30 days after the issuance of the order and as per the submissions of the notice (EOPMSPL), Aravind Maiya has filed an appeal against the NFRA order. However, it is also pertinent to note that the appeal is pending and no stay has been granted,” said Ashwani Bhatia, permanent member, SEBI.

SEBI, as per its regulations, invokes assessment of ‘fit and proper person’ criteria against the intermediary itself if an intermediary fails to replace a disqualified person within 30 days of such disqualification.

The order mentions that the notee has not taken any corrective action in respect of the same and has shown great reluctance to do the same.

“In view of the persistent non-compliance by the notified as the operating arm of a registered intermediary, serious violations of the law that affect the competence and integrity of the executive director of the Manager of Embassy REIT, and considering that the interests of the unitholders and investors are at stake due to the deliberate retention of a source of weakness in the REIT ecosystem by the notified party.”

“I am of the view that Sebi should urgently intervene in the interest of investors and issue interim directions to stop the current default by the notee,” Bhatia said.

In August this year, the NFRA imposed a fine of Rs 50 lakh on Aravind Maiya and banned him for 10 years from carrying out any audit in respect of the financial statements or internal audit of the functions and activities of any company or legal entity.

The case pertains to the diversion of Rs 3,535 crore from seven subsidiary companies of Coffee Day Enterprises Ltd (CDEL) to Mysore Amalgamated Coffee Estate Ltd (MACEL). MACEL is a subsidiary of the listed entity CDEL.