MCA summons Gautam Thapar, key CG Power executives

Former auditor asked to appear too; ministry officials inspect co’s headquarters.

MUMBAI: The corporate affairs ministry (MCA) has summoned Gautam Thapar, outgoing chairman of CG Power and Industrial Solution, along with other key management personnel and auditor KK Mankeshwar & Co to its Mumbai office next week, people in the know said.

Officials of the ministry, which has been inspecting the books of CG Power for alleged irregularities and unauthorised transactions, also carried out a physical inspection of the company’s Worli-based headquarters on Friday, these sources told ET.

The probe had started a few months ago, after the firm’s auditors resigned abruptly in April, they said.


“The probe is to ascertain under what circumstances did the auditors step down,” a government official said. “Also, there have been allegations of related-party transactions and the company’s audit committee flagging off certain unauthorised transactions apparently carried out by certain employees. These are being probed and the inspection report is expected to be submitted by the end of this month.”

Thapar Refused to Join Probe Earlier

The company management had claimed it had requested the erstwhile auditors to resign because its overseas loan arrangers advised the company to recruit top auditors, the official said. “Summons have now been issued to Thapar and others to join the probe next week.”
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According to industry sources, the ministry is believed to have asked Thapar to join the probe in the past too, but he had refused to oblige since it was not an official summon.

A detailed query sent to CG Power, formerly known as Crompton Greaves, and an email sent to Thapar remained unanswered as of press time Friday.

The board of CG Power on Thursday had sacked Thapar as its chairman. Thapar vehemently denied any fraud, claiming that all transactions were done with due approval from the board.

In a statement after his ouster, Thapar said he was kept out of the investigation and the resulting report and that his stand that there was no misconduct by promoters would be validated by the board at a meeting scheduled for Friday to discuss the firm’s financial results for the fourth quarter and the whole financial year ended March.
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The board meeting was still on at the time of going to the press.

Trouble started brewing at CG Power when, in March, parent Avantha Holding’s creditors started invoking pledge of the former’s shares. In response to this, the company board set up an operations committee to suggest measures for value preservation and enhancement.
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The committee was informed of some financial transactions that had been made without proper authority. So, an independent law firm was appointed to investigate, and some other questionable transactions were also identified. The group’s liabilities and advances to certain entities were found to be understated. The net worth of the company, too, was found to be understated due to unauthorised and inappropriate write-offs, and the relevant charges were debited to the profit and loss account, leading to refiling of financial statements.

The company then restated its financial statements for 2017-18 to incorporate the impact of the identified transactions. Its consolidated liability increased to Rs 7,976 crore from Rs 6,405 crore, and consolidated net worth increased to Rs 2,912 crore from Rs 2,714 crore, after adjusting for the impact of these transactions. Notably, FY18 total consolidated receivables balances from various subsidiaries, promoter affiliate companies and connected parties increased to Rs 2,657 crore from just Rs 131 crore.

Shares of CG Power, which have plunged by more than 70% in the last three months, rose for the second consecutive session on Friday, up 4.5% to Rs10.40 on BSE, after the company decided to sack Thapar and said it will sell non-core assets to help in a revival.

CG Power is in the business of products and solutions for the power sector, and the industry has been hit by the broader slowdown and muted industrial capex. Its attempt to sell a loss-making unit in Hungary failed earlier this year.
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