CG Power case: Sebi sanctions 11 entities; imposes 5-year securities market ban on Gautam Thapar and 3 other entities

Market regulator Sebi on Tuesday imposed a five-year ban and sanctions on former CG Power and Industrial Solutions chairman Gautam Thapar and three other entities for alleged embezzlement and misrepresentation of the company’s financial statements. company more than four years ago.

In addition, three other people – the former CFO of the company VR Venkatesh and two ex-directors Madhav Acharya and B Hariharan – have been banned from the securities market for periods varying from 6 months to 3 years.

The watchdog sanctioned a total of 11 entities in this case. The others are KN Neelkant, Atul Gulatee, Aditya Birla Finance Ltd and IndusInd Bank, according to a 248-page order.

A total of Rs 30.15 crore was imposed on the 11 entities.

Sebi said he banned Gautam Thapar, Avantha Holdings, Action Global and Solaris Industrial Chemicals from stock markets for 5 years. A fine of Rs 10 crore was imposed on Thapar while the other three entities were slapped with a fine of Rs 5 crore each.

A fine of Rs 10 lakh was imposed on Neelkant, Rs 5 lakh on Gulatee and Rs 1 crore each on Aditya Birla Finance Ltd and IndusInd Bank.

Sebi had taken over the suo-moto business after reports of alleged fraud at CG Power in August 2019.

“…The notified hereof, acted in concert with a view to executing a fraudulent scheme to embezzle funds or create encumbrances on the assets of a listed entity. In said scheme, each notarial played his assigned role in order to give these operations a different color from the one they actually hold.

“In this process, they overstepped their authority, they exercised authority that was not vested in them and abused the authority vested in them,” Sebi said.

As a result of their actions, Sebi said that the total liabilities of the company and that of CG Power Group may have potentially been understated by around Rs 1,053.54 crore and Rs 1,608.17 crore, respectively, at the March 31, 2018 and Rs 601.83 crore and Rs 401.83. crore, respectively, as of April 1, 2017.

Earlier, the regulator issued two interim orders, by which it kept Thapar, Venkatesh, Acharya and Hariharan and three entities – Avantha Holdings, Acton Global and Solaris Industrial Chemicals – from the securities market until further notice.

The regulator concluded that the entities were prima facie the recipients of loans and advances made by the company and were ordered to retain funds and other assets to the extent of outstanding claims against CG Power.

In the second interim order, the ESB was instructed by Sebi to appoint an independent audit firm to carry out a detailed forensic audit of the books of the account from the fiscal year 2015-16 to September 2019.

Subsequently, a detailed investigation was conducted by Sebi into the findings contained in the forensic audit report dated March 18, 2020.

The regulator found that Thapar, as well as certain directors of CG Power and related entities, had committed certain irregularities. These include the use of certain company assets as collateral, including being a co-borrower to allow third parties to obtain loans without proper authorization from CG Power’s board of directors.

They allegedly routed transactions through subsidiaries, promoter affiliates and other related parties for the ultimate benefit of companies related to the promoter group at the time, according to Sebi.

In addition, they allegedly used various accounting officials to conceal payments made by CG Power and facilitated interest-free advances to companies affiliated with the promoter, the regulator noted.

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