MCA wants fraud-hit CG Power and Industrial Solutions to re-open their books of accounts

The Ministry of Corporate Affairs (MCA) wants Chartered Accountants (CAs) to re-open the books of accounts of fraud-hit CG Power and Industrial Solutions asking them to restate accounts of the past five fiscal years reflecting their actual financial position, including receivables from companies linked to erstwhile promoter Gautam Thapar.

According to sources, MCA has filed a petition before the Mumbai bench of the National Company Law Tribunal (NCLT) seeking permission to re-open the books of account and recast the financial statements of CG Power and its subsidiary companies for the past five financial years beginning 2014-15.

Previously, MCA had asked Serious Fraud Investigation Office (SFIO) to look into the affairs of the company along with 15 other firms, including two subsidiaries CG Power Solutions Ltd and CG International BV.

CG Power, which has ousted its chairman Gautam Thapar over allegations of financial irregularities in August this year, had plans to re-examine its accounts over the past fiscal years to ascertain whether similar transactions may have escaped unnoticed after an internal probe into current performance revealed nine such deals causing a loss of Rs. 3,300 crore to the company.

MCA has asked companies linked to promoter Gautam Thapar to return the money and has initiated the second phase of the investigation to fix responsibility for the alleged fraudulent transactions. This includes an amount of Rs. 1,001.38 crore from Thapar’s Avantha Holdings Ltd and Rs. 287.75 crore that was due from Blue Garden Estate Pvt. Ltd. and Rs. 175 crore from Acton Global Pvt. Ltd. These firms were classified as “promoter connected party”.

In August, CG Power had stated that its Board instituted an investigation and 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.” It further stated that some liabilities and advances to related and unrelated parties had been understated.

The Board of CG Power had sacked Thapar as chairman in August. CEO K N Neelkant was also forced to resign thereafter.