A week after its board-instituted investigation unearthed a multi-crore financial fraud, CG Power & Industrial Solutions on Thursday removed its founder Gautam Thapar as chairman of the company, prompting the tycoon to break his silence to say that there was neither any fraud nor any misappropriation of funds.
The board of the fraud-hit firm through a circular resolution approved by a majority of the members removed Thapar as the chairman, the company said in a regulatory filing.
Thapar opposed the resolution, while CEO and Managing Director K N Neelkant, whose continuance has been questioned by investors, abstained from voting on the resolution.
The board is likely to meet on Friday to elect a new chairman, sources privy to the development said. In all likelihood, one of the independent directors will be appointed as the non-executive chairman.
Thapar, who had not commented since the company disclosed financial irregularities on August 20 after a marathon board meeting on the previous day, in a statement said: "No promoter or promoter entity has derived any undue benefit. There is simply no fraud".
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"The reports following the Board meeting of August 19, 2019 are disheartening. Indeed, I would say that the reports do not reflect facts," he said. "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 went on to add that promoters who have paid back Rs 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, August 30, 2019," he added.
Earlier in the day, the company in a regulatory filing said that: "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, have resolved to remove Mr Gautam Thapar as the Chairman of the Board with immediate effect."
The decision, it said, "has been taken in the interests of the company and its stakeholders in the discharge of the fiduciary responsibilities of the Board".
Sources said the move follows investors and lenders wanting a completely new management to run CG Power.
The company had, in a regulatory filing last week, stated that an investigation instituted by its board had found major governance and financial lapses including some assets 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." Also, some liabilities and advances to related and unrelated parties had been understated.
While the board had on May 10 sent Neelkant on leave pending an investigation into some "suspect, unauthorised and undisclosed" transaction, Thapar had continued as the company Chairman.
With some investors and lenders egging, the company board is on a cleanup drive and removal of Thapar is the first step, the sources said.
PTI had reported the move on August 25.
Thapar would, however, continue to be a member of the board - a position from which only shareholders can remove.
While the regulatory filing had not named anyone involved in the scam, the sources said the investigation had found strong links to the present management.
Thapar has only 8,574 shares out of 62.6 crore shares of the company. This shareholding does not provide him with a board position, the sources said.
Though a founder promoter of CG Power, he lost almost all of his shares after lenders in past years invoked pledges he had created to borrow money.
Yes Bank Ltd was the last one to invoke the pledge in May. It now owns 12.79 per cent of CG Power.
In the regulatory filing last week, CG Power had said the transactions appear to be undertaken in a "seemingly fraudulent manner" and that it would investigate them further.
It had stated that the company's current and past employees, including unnamed non-executive directors and certain Key Managerial Personnel (KMP) provided certain assets of the company as collateral and made the firm a co-borrower or guarantor to obtain loans without due authorisation.
The funds so raised were routed out of the company. This, the company said, had been going on for two years now.
Advances to related and unrelated parties of the company and group may have been potentially understated by Rs 1,990.36 crore and Rs 2,806.63 crore, respectively, as on March 31, 2018, and by Rs 1,479.34 crore and Rs 1,331.47 crore, respectively, as on April 1, 2017, the filing had said.
According to the filing, recovery of these amounts together with interest will be evaluated with appropriate legal inputs.
Also, total liabilities of the company and group may have been potentially understated by Rs 1,053.54 crore and Rs 1,608.17 crore, respectively, as on March 31, 2018, and by Rs 601.83 crore and Rs 401.83 crore, respectively, as on April 1, 2017, it noted.
These transactions, the filing said, appear to have been carried out by various means, including inappropriate netting off using ostensibly unrelated third parties, routing transactions through subsidiaries, promoter affiliated companies and other connected parties.
The company now plans to conduct a detailed forensic investigation to establish wrongdoing.
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