Irregular deals by brass may have led to Rs 3000 crore loss for CG Power: Report - EntornoInteligente
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New Delhi: A report by a law firm has revealed financial irregularities at CG Power and Industrial Solutions (CG) that may have led the company to lose as much as Rs 3,000 crore, sources close to the development told ET. “Most of these transactions were to help parent company Avantha Holdings; the scary part was that some were routed through third parties,” a source close to the development told ET. The company had mandated law firm Vaish Associates for an investigation that revealed that at least nine such transactions were allegedly carried out by CG’s brass without following due procedure, or being approved by the board. ET has a copy of the summary of this report. The transactions In 2016, CG sold its land in Nashik and the factory on it to a company named Blue Garden Estate Private for around Rs 200 crore. CG passed on Rs 145 crore to Avantha Holdings (AHL) and Rs 53 crore to a company named ACTON. The report states both Blue Garden Estate Private and ACTON were shell companies with no real businesses. ET found out from the MCA database that both the companies were incorporated in March 2016 and have the same registered address and authorised capital of Rs 1,00,000. In a similar transaction in 2017, CG sold its Kanjurmarg land in Mumbai to the same Blue Garden Estate for Rs 190 crore without board approvals, after its pact to sell this land to another company for Rs 499 crore fell through. The proceeds were again transferred to ACTON and two employees of CG were paid Rs 3 crore and Rs 1 crore, respectively, as a part of the deal. The Vaish report said that both these transactions were structured to raise advances for remitting to companies outside the CG group, and there were no approvals of the board and the risk and audit committee (RAC). The probe was initiated after a cheque issued by CG in favour of Yes Bank bounced. The cheque bouncing issue was brought to the notice of an ‘operations committee’ (OC), which was formed around the same time in April after CG’s parent Avantha Holdings’ (AHL) creditors started invocation of pledge of the former’s shares in March. AHL had taken a Rs 500 crore-loan for its own use from Yes Bank, which came with a condition that it will issue post-dated cheques as per repayment schedule. The cheques were issued by CG without approval from its board or RAC. After one of these cheques bounced on April 2, Yes Bank asked for a fresh cheque which was declined by CG board, citing lack of knowledge about the transaction. Yes Bank issued a legal notice under Section 138 of the ‘Negotiable Instruments Act’ to CG, its directors and the two officials who signed the cheques, ex-CFO VR Venkatesh and B Hariharan, group director (finance) at Avantha Group. “This was not the only transaction undertaken by CG without board approval and due processes. Some employees informed the OC of five transactions that were executed without authorisation and not appropriately recorded in financial statements of CG,” a source told ET. Subsequently, SRBC & Co, one of CG’s statutory auditors, highlighted four other transactions that needed investigation. The RAC then appointed Vaish Associates as legal counsel to assist with the investigation, which, in turn, got Deloitte on board to investigate from an accounting perspective. Yes Bank declined to comment. At the time of going to the press, detailed queries to CG Power and Gautam Thapar were unanswered. “All transactions as far as I know were proper and with requisite approvals. It seems that you have access to the Vaish report. I do not but I understand that it is inconclusive and heavily disclaimed,” B Hariharan said in response. Overseas arms CG’s overseas arms were also used to divert money through on-lending to Avantha Group entities, and in one particular case, to an investment firm owned by the promoter. The Singapore arm took a loan facility of $44 million (Rs 348 crore) for general corporate purposes in 2017. This was diverted as an interestfree loan to Avantha International, a private investment arm of the group’s promoter Gautam Thapar. “The on-lending to AIA was neither approved by CG board, nor permitted by the facility document,” the report said. Board’s action Another such transaction was routed through CG Middle East which took a foreign currency term loan of as much as $40 million (Rs 284 crore). This amount was drawn down in the account of guarantor CG International BV, which transferred it to CG India and then to CG PSOL in the UK which finally extended 97% of the total amount as an interest-free loan to Solaris, an Avantha group company outside of CG group. In another instance, CG made advances of around Rs 100 crore in three tranches between March and July 2018 to a vendor in Singapore, Mirabelle Trading, which is a trading arm of Avantha Group’s Ballarpur Industries . These payments were not supported by documentary evidence and did not have board approval. There were two other transactions, one involving transactions with the Middle East and another relating to a loan to subsidiary CG PSOL, which lacked approvals. Since the financial irregularities came to light, the board of CG has asked the chairman Gautam Thapar and CFO to step down, and sent its CEO on leave.
LINK ORIGINAL: Energy.economictimes.indiatimes

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