An investigation authorised by the Coffee Day Enterprises (CDEL) board has given a virtual clean chit to the Income-Tax Department and private-equity investors, both of whom were named in a letter written by Café Coffee Day founder VG Siddhartha before he killed himself last year.

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The probe was carried out by Ashok Kumar Malhotra, a former Central Bureau of Investigation and law firm Agastya Legal.

In a letter written to the board of directors and the company just before he died, Siddhartha had said he “could not take any more pressure” from private equity partners and other lenders, and had talked about harassment from the Income Tax, which had attached his Mindtree shares.

The probe concluded that a firm owned personally by the late Siddhartha owed subsidiaries of CDEL an amount of Rs 3,535 crore.

“A significant portion of the money may have been probably spent to "buy-back" equity from PE investors, repay loans and to pay interest apart from funding certain other private investments,” a report summary of the probe said.

It added that VGS may have felt aversive behavioral stimulus due to persistent reminders from the PE investors and other lenders.

“However, such reminders and the follow ups by the PE Investors and lenders are not something which is beyond normal industry practices and we believe that PE Investors were acting as per accepted legal and business norms,” it said.

The report further said that there was no “documentary evidence” of harassment from the Income Tax Department.

“Nevertheless, a perusal of the financial records during the relevant period suggests a serious liquidity crunch which may have been arisen due to the attachment of Mindtree shares by the Income Tax Department,” it said.

It also agreed with VGS’ statement that only he was privy to the nature of transactions carried out by him, and that any wrongdoing should not be attributed to the CDEL management.

A note by the company attached alongside the report summary said the company’s top priority was to pare debt and recover money from Siddhartha’s personal firm.

“Disinvestment process in the group continues and we are confident to have effective solution to all stakeholders. In spite of COVID -19 and lockdown since March 24, 2020, which is affecting our revenues severely, many companies of the group continue to be a going concern,” the company said.

First Published:Jul 24, 2020 6:25 PM IST