Sebi slaps Rs 10 cr penalty on Gautam Thapar for alleged fund diversion

Passes final order in CG Power fund diversion case; also fines Avantha Holdings Rs 5 cr and deal lenders IndusInd Bank and Aditya Birla Finance Rs 1 cr each

The Securities and Exchange Board of India (Sebi) slapped a penalty of Rs 10 crore on Gautam Thapar of the Avantha Group on Tuesday, for alleged fund diversion at CG Power and Industrial Solutions, where he was chairman.

The regulator also imposed Rs 5 crore on Avantha Holdings and Rs 1 crore each on IndusInd Bank and Aditya Birla Finance, lenders involved in the transactions with the Avantha Group.

A total penalty of Rs 30.15 crore has been slapped in the matter against 11 entities. Thapar and Avantha Holdings have also been restrained from the capital market for a period of five years.

“Noticee No. 1 (Thapar) was the Chairman of CG Power and even though he was well aware of funds being transferred to promoter group companies (which he either controlled or owned) for the purpose of repaying their loans at the cost of creating encumbrances on the assets of CG Power, he did not disclose his interest to the board of CG Power and has in fact even facilitated these fraudulent transactions by giving letters of comfort as the Chairman of CG Power,” Sebi said in an order.

In 2019, Sebi had passed an interim order against Thapar and three others after the CG Power’s board said the company had been hit by an accounting scandal and the liabilities of the group had been understated by over Rs 1,600 crore for 2017-18.

After the company’s disclosure of “significant accounting irregularities”, Sebi's examination report found several irregularities and fraudulent transactions being carried out by key officials of the company including Thapar. The transactions were allegedly conducted to wrongfully divert funds from the company to the Avantha group.

Thapar had challenged Sebi’s interim order before the Securities Appellate Tribunal (SAT). The tribunal had directed Sebi to pass the final order.

Sebi has said CG Power should continue to take all necessary steps to recover the amounts due to the company as directed in the interim order dated September 17, 2019.