CG Power case: Sebi bans Gautam Thapar, 3 others from markets; orders a forensic audit

MUMBAI: The Securities and Exchange Board of India (Sebi) has barred C G Power’s ex-chairman Gautam Thapar, former directors Madhav Acharya and B Hariharan and chief financial officer V R Venkatesh from accessing the securities market alleging fraudulent transfer of funds from the company.

The regulator on Tuesday in an interim order has also restrained them from being associated with any market intermediary or listed companies.

Sebi has asked BSE to appoint forensic auditors to audit the books of accounts of CG Power from the financial year 2015-16 onwards till date to examine the manipulation of books of accounts, misrepresentation including financial and business operations and wrongful diversion of company funds. The audit firm will have to submit the report to Sebi within six months from the date of the order.

“..it is noted that the funds diverted from CG Power were fraudulently transferred to its promoter company i.e. Avantha Holdings and entities related or connected with the company, viz. Avantha International, Acton, Ballarpur International, Mirabelle and Solaris, without the knowledge of the company and without any approval from its board,” Sebi whole-time member G Mahalingam said in his order.

”..the aforementioned entities as recipients of the fraudulent transfer of funds of the company amounting to ₹1223.80 crore and are prima facie liable for the manipulation in respect of the financials of CG Power.”

The regulator said an examination of the preliminary investigation report and audit report prima facie indicate misstatement of accounts and diversion of funds from a listed company and its subsidiaries, thus violating Sebi’s PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) and listing and disclosure norms. “The transactions were purportedly carried out by certain company personnel (both current and past) including certain non–executive directors, key management personnel’s, etc. These transactions are prima facie designed to divert/siphon off money from the listed company, which rightfully belongs to its shareholders. Some of the outgoing fund transfers do not appear to be supported by any comprehensible underlying transactions raising doubts on the bona fides and leaving gaps between various transactions. These acts on the part of the Noticees( Gautam Thapar and others) have resulted in the shareholders of CG Power losing the value of their shareholding which amounts to a ‘fraud’ on its public investors,” Sebi said.