Description

SEBI settlement order against Blue Coast Hotels Limited and Mr. Kushal Suri for failure to provision Rs. 318.95 Crore contingent liability related to space buyers refund in Aerocity Delhi project during FY19-FY22.

Summary

SEBI issued a settlement order (SO/JS/DP/2025-26/8498 and SO/JS/DP/2025-26/8500) against Blue Coast Hotels Limited and its promoter and whole-time director Mr. Kushal Suri. The proceedings arose from the company’s failure to provision a contingent liability of Rs. 318.95 Crore related to refunds owed to space buyers in the failed Delhi Aerocity five-star hotel project during financial years 2019 to 2022. NSE’s examination report revealed irregularities in financial statements, leading to SEBI’s detailed investigation and subsequent adjudication proceedings.

Key Points

  • Blue Coast Hotels Limited participated in a 2010 tender for a five-star hotel property at Aerocity, Delhi invited by DIAL
  • The company incorporated SPV ‘Silver Resort Hotel India Private Limited’ (SRHIPL) for the project
  • SRHIPL entered into Joint Development Agreement with Blue Coast Infrastructure Development Private Limited (BCIDPL)
  • BCIDPL raised funds against lease of commercial space from space buyers, with SRHIPL as confirming party
  • DIAL took over project possession on July 16, 2015 due to non-payment of license fees and periodic dues by SRHIPL
  • Delhi High Court ordered refund of Rs. 318.95 Crore to space buyers on October 03, 2018
  • Blue Coast Hotels Limited was one of the defendants in the representative suit
  • Company failed to record Rs. 318.95 Crore as contingent liability in FY19, FY20, FY21, and FY22
  • The contingent liability was only recorded in FY23 as per advice of new auditors
  • NSE examination report identified multiple irregularities in financial statements for FY19-FY22
  • Settlement applications filed: No. 8498/2025 (Blue Coast Hotels Limited - PAN: AAACM0037G) and No. 8500/2025 (Mr. Kushal Suri - PAN: BOFPS9411B)
  • Adjudication proceedings also initiated against the Chief Financial Officer of Blue Coast Hotels Limited

Regulatory Changes

No new regulatory changes introduced. This order enforces existing accounting standards requirements for disclosure of contingent liabilities in financial statements.

Compliance Requirements

  • Listed companies must properly identify and disclose all contingent liabilities as per applicable accounting standards
  • Contingent liabilities arising from court orders and legal proceedings must be recorded in financial statements
  • Directors and key management personnel must ensure accurate financial reporting and disclosure compliance
  • Companies must provision contingent liabilities even when primary liability rests with subsidiary or related entities, if parent company is party to legal proceedings
  • Settlement applications must be filed with complete documentation and justification for violations

Important Dates

  • 2010: Blue Coast Hotels qualified for Delhi Aerocity Project tender
  • July 16, 2015: DIAL took over project possession from SRHIPL
  • October 03, 2018: Delhi High Court ordered refund of Rs. 318.95 Crore to space buyers
  • FY19-FY22 (Investigation Period): Period during which contingent liability was not disclosed
  • FY23: Contingent liability first recorded in annual report
  • 2025: Settlement applications filed (No. 8498/2025 and No. 8500/2025)
  • January 14, 2026: Settlement order issued

Impact Assessment

Financial Impact: The undisclosed contingent liability of Rs. 318.95 Crore represents a material misstatement in Blue Coast Hotels Limited’s financial statements for four consecutive years. This non-disclosure significantly impacted the accuracy and reliability of the company’s financial position presented to investors and stakeholders.

Corporate Governance: The settlement proceedings against both the company and its promoter/whole-time director highlight serious corporate governance lapses in financial oversight and compliance with accounting standards.

Investor Impact: Investors who relied on the financial statements during FY19-FY22 were deprived of material information about a significant contingent liability that could substantially affect the company’s financial position.

Market Integrity: The case reinforces SEBI’s commitment to ensuring accurate financial disclosures and holding companies and their management accountable for violations of disclosure norms.

Precedent Value: This order serves as a reminder to listed companies about the importance of properly identifying, evaluating, and disclosing contingent liabilities, particularly those arising from court orders and legal proceedings involving subsidiaries or related entities where the parent company is also a party.

Impact Justification

Major accounting violation involving Rs. 318.95 Crore undisclosed contingent liability spanning multiple financial years (FY19-FY22), resulting in settlement proceedings against the company and its promoter/whole time director.