Faced with allegations of fraud worth thousands of crores, CG Powe r has ousted its Chairman Gautam Thapar with immediate effect. The move follows disclosures made by the company that some employees had carried out unauthorised transactions, which led to a potential understatement of not only the liabilities but even advances to related and unrelated parties of the company and the group.

“In cognizance of the current situation being faced by the company and the recent developments, including disclosures dated August 19, 2019, made by the company, the Board of Directors, through a circular resolution dated August 29, 2019, passed by majority consent, has resolved to remove Gautam Thapar as the Chairman of the Board with immediate effect,” the company said in a regulatory filing.

While the Board did not disclose how Thapar was directly linked to the alleged fraud, the company had earlier informed stock exchanges that an investigation by an independent law firm had found that “suspect” transactions were carried out by some key managerial personnel and other employees prejudicial to the company’s interest.

Responding to the disclosures made by the Board, Thapar, in a statement, said that there was no fraud. “I must say that no funds lent by banks nor any funds of CG have been misappropriated. The money has been applied with due Board approval. All inter-corporate transactions have been fully authorised by the Board.”

“No Promoter or Promoter entity has derived any undue benefit. There is simply no fraud. Promoters who have paid back ₹4,000 crore to lenders since 2015 do not cheat. I had no opportunity to participate in the ‘investigation’ nor the resulting ‘report’. I leave it to the stakeholders to draw their own conclusions from this fact. I will reaffirm this at the Board meeting tomorrow,” Thapar added.

Promoters of CG Power have pledged 100 per cent of their holding in the company. YES Bank holds a nearly 13 per cent stake in the company, acquired through the invocation of a pledge. While shares of CG Power were up by 4.7 per cent at close on the BSE, YES Bank’s share price was down 3.6 per cent.

‘Board also answerable’

According to shareholder activists, the Board also needs to be seriously questioned. “The impression of a helpless Board does not hold water any more and there is a serious need to look once again at the Board composition,” said JN Gupta, MD, Stakeholder Empowerment Services (SES).

Apart from Thapar, the Board also consists of KN Neelkant, CEO and Managing Director; and Sudhir Mathur, a Whole Time Executive Director. It also has five independent directors: Omkar Goswami, Jitender Balakrishnan, Ramni Nirula, Ashish Guha and Narayan K Seshadri.

The issue also brings to light the role of auditors. “They should have raised red flags over this and key management personnel should be investigated for what seems like a fraud,” said Shriram Subramanian, MD, InGovern, a proxy advisory firm.

“They should look at involving the Serious Fraud Investigation Office and the Ministry of Corporate Affairs,” he added.

“I must say that no funds lent by banks nor any funds of CG have been misappropriated. The money has been applied with due Board approval. All inter-corporate transactions have been fully authorised by the Board.”

Other large shareholders include HDFC Mutual Fund with 9.18 per cent, Aditya Birla Mutual Fund: 8.94 per cent; Franklin Templeton: 3.1 per cent; LIC: 2.25 per cent; Reliance Capital : 2.03 per cent and IDFC Sterling Fund with 1.53 per cent.

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