CG Power case: Sebi slaps 5-yr ban on Gautam Thapar | The Financial Express

CG Power case: Sebi slaps 5-yr ban on Gautam Thapar

Former chief financial officer VR Venkatesh and former directors Madhav Acharya and B Hariharan have been fined Rs 1 crore each and have been restrained from accessing the securities market for three and a half years.

CG Power case: Sebi slaps 5-yr ban on Gautam Thapar
In sum, the regulator has imposed penalties totalling Rs 30.15 crore on 11 entities in the matter. (Photo source: IE)

The Securities and Exchange Board of India (Sebi) on Tuesday levied a penalty of Rs 10 crore on former CG Power and Industrial Solutions chairman Gautam Thapar, and barred him from the securities market for five years, for unfair trade practices pertaining to the company. Former chief financial officer VR Venkatesh and former directors Madhav Acharya and B Hariharan have been fined Rs 1 crore each and have been restrained from accessing the securities market for three and a half years.

Avantha Global, Action Global and Solaris Industrial Chemicals have been barred from the securities market for five years and levied a penalty of Rs 5 crore each. Aditya Birla Finance and IndusInd Bank have been fined Rs 1 crore each.

In sum, the regulator has imposed penalties totalling Rs 30.15 crore on 11 entities in the matter. “The noticees acted in concert to execute a fraudulent scheme of diversion of funds or creating encumbrances of assets of a listed entity. Each noticee played its assigned role in order to give these transactions a colour different than the one which they actually hold. In this process, they misused the authority given to them,” the 248-page Sebi order said.

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As a result of their acts, the funds and assets belonging to the listed company were either diverted or were created encumbrance upon, because of which total liabilities of the company and the CG Power Group may have been potentially understated by about Rs 1,053.5 crore and Rs 1,608.2 crore, respectively, as on March 31, 2018 and by Rs 601.8 crore and Rs 401.8 crore, respectively, as on April 1, 2017.

Further, advances to related and unrelated parties of the company and the CG Power Group were potentially understated by Rs 1,990.4 crore and Rs 2,806.6 crore, respectively, as on March 31, 2018 and by Rs 1,479.3 crore and Rs 1,331.5 crore, respectively, as on April 1, 2017. After possible violations of securities laws came to light, the regulator directed BSE to appoint an independent auditor for conducting a detailed forensic audit of the books of accounts of CG Power from FY16 till September 17, 2019.

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Meanwhile, some of the entities filed an appeal before the Securities Appellate Tribunal, which dismissed the appeal on April 6, 2021 and asked the regulator to file a show-cause notice within four weeks and decide the matter within six months after hearing the noticees.

Based on the forensic findings, Sebi filed a show-cause notice alleging diversion of assets and funds of CG Power to Avantha Holdings, understating of liabilities of CG Power and non-disclosure of increased liabilities to the public, misrepresentation of financial statements for FY17 and FY18, and related-party transactions not carried out at arm’s length and not disclosed.

The concealment of these transactions from the board of directors of CG Power and from its public shareholders had interfered with the normal mechanism of price discovery and integrity of securities markets, and created a misleading appearance with respect to share price movement of CG Power, thus effectively manipulating the share price of CG Power, the SCN said.

Financial statements published by CG Power are relied upon by the investors in the securities markets to base their investment decisions, and misrepresentation of the same is a fraudulent activity, it observed.

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