Embassy REIT CEO Arvind Maiya resigns following SEBI’s order to suspend him

Aravind Maiya, the CEO of Embassy Office Parks Management Services which manages Embassy REIT, shall resigns from his post following directions from market regulator Sebi to suspend him and immediately appoint an interim CEO. Sebi’s directions follow an order by the National Financial Reporting Authority (NFRA) that banned Maiya from conducting any audit relating to financial statements or internal audits of the functions and activities of a company or legal entity for 10 years. It also imposed a fine of Rs 50 lakh on Maiya.

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 listed Real Estate Investment Trust (REIT).

In a regulatory filing on Tuesday, Embassy Office Parks REIT said, “While we review the order and evaluate all options, Aravind Maiya, in accordance with SEBI’s directive, will step down as CEO of Embassy REIT with immediate effect.”

He will take on the role of head of strategy for Embassy REIT.

The REIT’s board and management team will monitor all its operations and capital allocation to ensure that normal business operations are not compromised in any way, while evaluating the most appropriate approach for the interim CEO position, it added to it. “Our focus remains on maintaining the highest standards of governance and ensuring the continued success of Embassy REIT,” the filing said. In a 27-page order, SEBI had said, “The cessation officer (Embassy Office Parks Management Services) is directed to suspend Aravind Maiya as CEO and appoint an interim CEO with immediate effect, in accordance with applicable laws, including ‘suitability and fitness’ criteria of a good person, until further directions, or until the NFRA order dated August 19, 2024 is stayed/set aside, whichever is earlier,” Sebi said.

The directive enters into force immediately and will remain in force until further notice.

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

The Sebi direction came after it started examining the compliance status of Embassy Office Parks REIT and its manager EOPMSPL with the “fit and proper person” criteria under the intermediaries regulations.

In a 27-page interim order issued on Monday, the regulator has issued a show-cause notice to the company asking why an investigation should not be initiated against the company and why a fine should not be imposed on the company .

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

“I note that the NFRA order dated August 19, 2024 came into effect after 30 days of the issuance of the order and as per the observations of the notice (EOPMSPL), an appeal against the NFRA order has been filed by Aravind Maiya. It is also pertinent to note that the appeal is pending and no stay has been granted,” said Sebi’s regular member Ashwani Bhatia.

Sebi, as per its regulations, invokes the assessment of the criteria of “suitability and propriety” against the intermediary itself if an intermediary fails to replace a disqualified person within 30 days of such disqualification.

The order stated that the notice has not taken any corrective action and has shown great reluctance to do the same.

“In light of the continued non-compliance by the Notifier as the operating arm of a registered intermediary, serious violations of law affecting the competence and integrity of the CEO of the manager of Embassy REIT, and given that the interests of the shareholders and investors are at stake due to the notification’s deliberate retention of a source of weakness in the REIT ecosystem.

“I am of the view that Sebi should urgently intervene in the interest of investors and issue interim directions to stop the continued non-compliance through the notice,” Bhatia had said.

In August this year, the NFRA fined Maiya Rs 50 lakh and barred him from conducting any audit relating to financial statements or internal audits of the functions and activities of any company or legal entity for 10 years.

The case relates to diversion of Rs 3,535 crore from 7 subsidiaries of Coffee Day Enterprises Ltd (CDEL) to Mysore Amalgamated Coffee Estate Ltd (MACEL). MACEL is a subsidiary of the listed entity CDEL.