Axis Trustee Services faces Sebi probe in Embassy REIT matter

Sebi's interim order in the Maiya case was triggered by NFRA order dated August 19,2024

The Securities and Exchange Board of India (Sebi) has launched a probe into Axis Trustee in connection with a senior-level appointment at the Embassy Office Parks Real Estate Investment Trust (REIT), people familiar with the matter told Moneycontrol.

Axis serves as the trustee of the REIT, tasked with protecting the interests of public investors and ensuring regulatory compliance. Axis Trustee Services is a Sebi-registered debenture trustee company that provides corporate trustee, administration and agency services across domestic markets as well as at the GIFT City.

The investigation centres on why Axis did not intervene to remove Embassy REIT’s chief executive officer (CEO) Arvind Maiya despite regulatory developments that raised questions over his fulfilment of “fit and proper” criteria.

On November 4, Sebi passed an interim order, saying Maiya no longer met the “fit and proper” criteria required of CEOs of listed entities. Before joining Embassy, Maiya was part of BSR & Associates, an affiliate of KPMG, which audited Coffee Day Enterprises’ accounts in FY19.

In August 2024, the National Financial Reporting Authority (NFRA) barred Maiya from auditing for a decade and fined him Rs 50 lakh for lapses in the Coffee Day case. NFRA also imposed a Rs 10 crore penalty on BSR & Associates.

Sebi believes Maiya effectively lost his fit and proper status from the date of the NFRA order, which was August 9, 2024, the sources said. Yet, he continued as the CEO till November 5, when Sebi’s interim order forced the REIT’s board to act.

“Sebi has sent notices to Axis Trustee asking why action should not be taken against them for failing to protect investor interests and for not acting on Maiya until Sebi’s order,” one of the sources said. “Ensuring regulatory compliance is a core responsibility of trustees.” The probe is still underway but several parties, including Embassy, are understood to have either filed or are preparing to file settlement applications. These notices were sent by Sebi in the May-June period this year.

Emails sent to Axis and Sebi remained unanswered.

Trustees of REITs hold and monitor the trust’s assets on behalf of investors. They are expected to oversee the REIT manager, who handles day-to-day operations and ensure adherence to all regulatory requirements and agreements.

Sebi’s November 4 order noted that Coffee Day Enterprises had allegedly diverted Rs 3,535 crore to a subsidiary without the knowledge or approval of its board or audit committee.

“We still need to see how the fit-and-proper standard is interpreted by courts, and whether an NFRA order would automatically trigger disqualification,” a second person said. “It also remains to be seen whether Sebi permits settlement in this case.”

While entities facing Sebi action can seek a consent or settlement order, the regulator rarely settles matters involving market-wide impact or serious lapses such as fraud.