The new auditor of Hindustan Copper Ltd has sought an action taken report on the issues red-flagged by its predecessor in the company’s annual report for 2017-18.

An official associated with the development told BusinessLine that the previous auditor J Gupta & Co had raised about 100 issues. The Comptroller & Auditor General of India (CAG) has responded to only six of them.

“The new auditor, Chaturvedi & Co., has sought details on all based on which they (the new auditor) will form their views,” the official added.

The previous auditor had alleged that the company failed to prevent cartelisation and even charged that there was a “deep-rooted conspiracy to drain Hindustan Copper of its valuable resources for the benefit of others”.

Last year, J Gupta & Co was unceremoniously removed as auditor and Chaturvedi & Co was appointed on July 17, 2018.As Hindustan Copper is a central public sector undertaking, its auditors are appointed and removed by the CAG.

The spat between the management and the statutory auditor came out in the open when the company’s annual report for 2017-18 was released, in September 2018.

After the auditor’s allegations against the management came out, the company’s scrip was hammered on the stock market. In September, the Hindustan Copper scrip was trading 40 per cent lower than its January price. The stock has nosedived further and traded at ₹50 apiece in March, just half the price in January 2018.

J Gupta & Co., in its report, had alleged “a deep-rooted conspiracy to drain the company of its valuable resources for the benefit of others”. When contacted, J Gupta told BusinessLine that the firm then decided to excuse itself from the audit of the company citing difficulties in working with the management.

Alleged discrepancies

One observation made by J Gupta & Co. was regarding the inadequate steps taken to prevent cartelisation while bids were called for awarding contracts.

According to the auditor’s noting, Hind Copper was allotting contracts ignoring obvious facts and allowing one person in different names, thus encouraging “monopolistic and restrictive activities”.

The auditor cited the example of two companies having the same email address and their registered addresses being housed on the same plot in Delhi. They were being considered as two independent bidders. This led to cartelisation during bidding.

In its response, Hindustan Copper had citied the separate registration of companies as evidence enough to consider them as independent entities. But the company has not responded to the auditor’s observation that the promoters of these companies for all practical purposes wereone and the same.

The auditor had also red flagged operations at the company’s Taloja Copper Project (TCP). A move to allow using TCP’s unutilised spare capacity for converting externally procured cathodes has been called “a deep-rooted conspiracy to drain the company of its valuable resources for the benefit of others”.

The company has rubbished this claim and said that this amounts to defamation of a government-owned company.