Fraud-hit CG Power sacks CFO Venkatesh

Our Bureau New Delhi | Updated on September 26, 2019

Some investors and lenders of Crompton Greaves have questioned continuance of company CEO and MD K N Neelkant. Representative image

Company CEO and Managing Director K N Neelkant, who was sent on leave on May 10, continues in his role for now

The Nomination and Remuneration Committee of CG Power and Industrial Solutions has sacked its CFO V R Venkatesh. "The termination of the contract is due to the grave nature of the misconduct and breach of trust on his part and having knowingly undertaken actions which are detrimental to the interests of the company (CG Power) and its stakeholders," the Board said in a statement.

This development comes close on the heels of its chairman, Gautam Thapar being told to go, after an investigation revealed a multi crore financial fraud in the company. However, Thapar countered and said that he had no opportunity to participate in the ‘investigation nor the resulting ‘report’.

PTI adds:

Company CEO and Managing Director K N Neelkant, who was sent on leave on May 10 by the board to enable proper investigation into financial irregularities, continues in his role for now.

However, some investors and lenders have questioned his continuance given that the fraud involving some assets of the firm being provided as collateral and the money from the loans siphoned off by “identified company personnel, both current and past, including certain non-executive directors”, happened under his watch.

Also read: CG Power reports massive fraud

The board-instituted investigation had also found some liabilities and advances to related and unrelated parties being understated. The company has restated its financial results for the previous fiscal taking into account the unstated liabilities, the filing said.

“Certain unauthorised/unapproved banking transactions in the nature of loans (unauthorized transactions/ loans) taken from banks / financial institutions (lenders)/a connected party aggregating to ₹635 crore were not disclosed in the Standalone Financial Results of prior years / periods by off-setting against certain related and unrelated party balances,” the company’s auditors said in the audit note furnished with the restated statement.

It said interest expenses of ₹90.93 crore which were serviced by the company in relation to these unauthorised loans were accounted under different heads in the Standalone Statement of Profit and Loss and “were mispresented in the financial statements/ results of prior years / periods.”

“The company also has loans including interest receivables and advances recoverable from related and unrelated parties, as reinstated on March 31, 2019, aggregating to ₹2,439.94 crore for which further interest income aggregating to ₹337.61 crore is currently not recorded as at March 31, 2019,” it said.

On August 29, the board has removed Thapar as the chairman of the company through a circular resolution approved by a majority of the members. Thapar opposed the resolution, while CEO and Managing Director K N Neelkant had abstained from voting.

Read more: CG Power board sacks Chairman Gautam Thapar with immediate effect

Thapar, who had not commented on the issue since the company disclosed financial irregularities on August 20 after a marathon board meeting on the previous day, had in a statement after his removal said: “No promoter or promoter entity has derived any undue benefit. There is simply no fraud.”

“The reports following the Board meeting of August 19, 2019 are disheartening. Indeed, I would say that the reports do not reflect facts. In the interests of all stakeholders, including banks and financial institutions, 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,” he said.

The board was headed by him during that period. Thapar would, however, continue to be a member of the board -- a position from which only shareholders can remove him.

Though a founder promoter of CG Power, Thapar lost almost all of his shares after lenders in past years invoked pledges he had created to borrow money. He currently has only 8,574 shares out of 62.6 crore shares of the company.

Published on August 31, 2019

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