NFRA fines auditors ₹1.1-cr for lapses in Coffee Day unit case

The National Financial Reporting Authority (NFRA) has slapped total fines of ₹1.10 crore on a firm and two individual auditors, citing lapses in the auditing of Tanglin Developments Ltd (TDL), an arm of Coffee Day Enterprises Ltd (CDEL), and barred them from undertaking fresh work for varying periods.

In an order dated August 18, the regulator imposed fines of ₹1 crore on Sundaresha & Associates and ₹5 lakh each on C Ramesh and Chaitanya G Deshpande for "professional misconduct" in the auditing of TDL's books for 2019-20.

Moreover, Sundaresha & Associates has been barred for a period of four years, while each of the individual auditors faces a five-year ban.

The issue relates to the diversion of funds worth ₹3,535 crore from seven subsidiaries of CDEL to Mysore Amalgamated Coffee Estate Ltd (MACEL). MACEL is owned and controlled by the promoters of CDEL.

NFRA said its investigations revealed the "auditors failed to exercise professional judgement and scepticism during the audit of TDL where borrowings of ₹2,027.46 crore was used in fraudulent diversion of funds to MACEL worth ₹2,073.23 crore through its group entities, given without any business rationale or agreement and the money ultimately moved to promoters entity MACEL".

The auditors, NFRA said, also failed to maintain required standards during the "audit of fraudulent diversion of funds in the name of land advances".