• Aravind Maiya, CEO of Embassy Office Parks, has resigned following an order from the Securities and Exchange Board of India (SEBI).
• SEBI deemed Maiya unfit for the role, citing his failure to meet the 'fit and proper' criteria.
• The decision was influenced by an order from the National Financial Reporting Authority (NFRA) regarding alleged financial irregularities at Coffee Day Enterprises, where Maiya was the engagement partner.
• The case underscores the importance of regulatory oversight, the role of auditors, and the responsibilities of those in power.

In a significant development in India's real estate sector, Aravind Maiya, the CEO of Embassy Office Parks, the country's largest real estate investment trust (REIT), has stepped down from his position.

This decision comes in the wake of an order from the Securities and Exchange Board of India (SEBI), the country's market regulator, which deemed Maiya unfit for the role. The SEBI order, available on the regulator's website, directed Embassy Office Parks Management Services, the manager of Embassy REIT, to suspend Maiya from his role as CEO.

Regulatory Action and 'Fit and Proper' Criteria

The regulator cited Maiya's failure to meet the 'fit and proper' criteria for the position as the reason for his suspension. The 'fit and proper' criteria, a standard used across institutions with fiduciary responsibilities to investors, includes checks on an individual's track record, professional history, and any past regulatory orders against them. SEBI's action was prompted by an order from the National Financial Reporting Authority (NFRA) in August.

The NFRA had examined the statutory auditors of Coffee Day Enterprises for their role in alleged financial irregularities at the company in 2018-19. Maiya was the engagement partner at the statutory auditor for Coffee Day Enterprises at the time.

The NFRA, a quasi-regulator that oversees the conduct of auditors, found serious lapses on the part of the auditor, Maiya, and others. Despite Maiya challenging the order, SEBI found that he did not meet the 'fit and proper' criteria for institutions such as REITs in the interim. SEBI's order stated, The (NFRA) Order leads to a reasonable inference that Mr. Aravind Maiya failed to act in public interest. Instead, he acted in a manner which harmed ordinary investors.

Embassy REIT and the Role of Auditors

The order also noted that despite numerous emails, meetings, and specific instructions, the manager of Embassy REIT had attempted to retain Maiya. Embassy REIT, the first publicly listed REIT in India, owns and operates a portfolio of 51.1 million square feet. The company was listed on the bourses in 2019 and manages nearly Rs 40,000 crore of unit holders' money. Maiya was appointed as the CEO of the Reit's manager in July 2023.

The NFRA's order in August followed an investigation into the diversion of Rs 3,535 crore from seven subsidiary companies of Coffee Day Enterprises Ltd (CDEL), to Mysore Amalgamated Coffee Estate Ltd (MACEL).

A show-cause notice was issued to BSR & Associates LLP (auditor), Aravind Maiya (Engagement Partner or EP), and Amit Somani (Engagement Quality Control Reviewer or EQCR) for 2018-19. The NFRA found serious deficiencies in audit documentation, with unauthorized changes being made to audit work papers even after reports were signed.