NCLT allows MCA to reopen CG Power accounts for 5 years

The Mumbai Bench of the NCLT has allowed re-opening of the books of account and recasting of financial statements of CG Power and Industrial Solutions Ltd for the past five years. The Ministry of Corporate Affairs (MCA) had filed the plea with NCLT for re-opening the books after allegations of fraud were levelled against Gautam Thapar who was ousted as the Chairman of CG Power.

‘Liabilities may be understated’

MCA had said that the total liabilities of the company and the Group may have been potentially understated by about ₹1,053.54 crore and ₹1,608.17 crore, respectively, as of March 2018; and by ₹601.83 crore and ₹401.83 crore, respectively, as of April 2017. Advances to related and unrelated parties of the company and the Group may have been potentially understated by ₹1,990.36 crore and ₹2,806.63 crore, respectively, as of March 2018; and by ₹1,479.34 crore and ₹1,331.47 crore, respectively, as of April, 2017.

“We are of the considerate view, after hearing all the parties concerned, that the permission is hereby accorded to the Applicant (MCA) for re-opening of the books of accounts and recasting of the financial statements of the Respondent No 1 Company (CG Power) and its subsidiary companies for the past 5 (five) years,” NCLT said, in its ruling.

Agency to verify allegations

The NCLT has also said that an independent investigation must be done to verify the allegations against Thapar. The investigating agency should also look into the involvement of ex-chairman, directors, key managerial persons (KMPs) and other staff of the company and its subsidiary companies who were involved in committing fraud or irregularities. “The report of the investigating agency be also considered, while submitting the re-casted accounts for suitable orders of this Bench,” the NCLT said. The books will be re-opened from the financial year 2014-2015 to 2018-19

Sumit Agrawal, Founder, Regstreet Law and ex-Sebi official, who is representing one of the directors before SEBI, said, “Reopening the accounts is a serious matter. It unsettles the very basis of a company, and affects many persons who may have not even been heard. It is like taking a buried decomposed body out of the grave. It cannot be done lightly unless the doubt on reliability is strongly suggestive of the wrongdoings. NCLT order seemingly has lowered the threshold required in law.”