SEBI on Monday (November 4, 2024) ordered suspension of Aravind Maiya, the CEO of Embassy REIT manager firm Embassy Office Parks Management Services, and appoint an interim CEO with immediate effect.

SEBI’s direction follows a National Financial Reporting Authority (NFRA) order that barred Maiya for 10 years from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate. It also imposed ₹50 lakh penalty on Maiya.

“The noticee [Embassy Office Parks] is directed to suspend Aravind Maiya from acting as its CEO and appoint an interim CEO with immediate effect, in compliance with applicable laws including ‘fit and proper person’ criteria, till further directions, or till the NFRA Order dated August 19, 2024 is stayed/set aside, whichever is earlier,” Sebi said.

The direction will take effect immediately and will be in force until further orders.

In a regulatory filing, Embassy Office Parks REIT said, “While we are reviewing the order and evaluating all options, in compliance with SEBI’s directive, effective immediately, Aravind Maiya will be stepping down as CEO of Embassy REIT.” It added that Maiya would assume the role of head of strategy for Embassy REIT.

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

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

The NFRA order is related to lapses in the audit of Coffee Day Enterprises for the 2018-19 financial year.

The Sebi direction came after it started examination of the status of compliance 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 compliance with applicable laws till further directions, or till the NFRA order dated August 19, 2024 is stayed/set aside, whichever is earlier.

Sebi directed Embassy Office Parks Services to ensure compliance with ‘fit and proper person’ criteria.

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

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

“I note that NFRA order dated August 19, 2024, was effective after 30 days from the issuance of the order and as per the submissions of the noticee (EOPMSPL) an appeal has been filed by Aravind Maiya against the NFRA order. However, it is also pertinent to note that the appeal is pending, and no stay has been granted,” SEBI’s whole-time member Ashwani Bhatia said.

SEBI, as per its regulations, invokes the assessment of “fit and proper person” criteria against the very intermediary if an intermediary fails to replace a person with a disqualification within 30 days of such disqualification.

The order mentioned that the noticee has failed to take any remedial action regarding the same and has shown strong reluctance in doing the same.

“In the face of persistent non-compliance by the noticee as the operational arm of a registered intermediary, grave violations of law touching upon the competence and integrity of the CEO of the Manager of Embassy REIT, and considering that the interest of unitholders and investors is at stake due to deliberate retention of a source of weakness in the REIT ecosystem by the noticee.”

“I am of the view that Sebi is required to intervene urgently in the interest of investors and issue interim directions to stop the on-going non-compliance by the noticee,” Bhatia said.

In August this year, the NFRA imposed a penalty of Rs 50 lakh on Aravind Maiya and barred him for 10 years from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate.

The case pertains to the diversion of ₹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.