(PTI) Markets regulator Sebi on Tuesday imposed a five-year ban as well as penalties on CG Power and Industrial Solutions' former chairman Gautam Thapar and three other entities for alleged diversion of funds and misrepresentation of the company's financial statements more than four years ago.
Besides, three other individuals -- the company's former CFO V R Venkatesh and two ex-directors Madhav Acharya and B Hariharan -- have been barred from the securities market for periods varying from 6 months to 3 years.
The watchdog has penalised a total of 11 entities in the matter. Others are K N Neelkant, Atul Gulatee, Aditya Birla Finance Ltd and IndusInd Bank, according to a 248-page order.
A total of ₹30.15 crore has been imposed on the 11 entities.
Sebi said it has banned Gautam Thapar, Avantha Holdings, Action Global and Solaris Industrial Chemicals from the securities markets for 5 years. A fine of ₹10 crore has been imposed on Thapar while the three other entities have been slapped with a penalty of ₹5 crore each.
A fine of ₹10 lakh has been imposed on Neelkant, ₹5 lakh on Gulatee and ₹1 crore each on Aditya Birla Finance Ltd and IndusInd Bank.
Sebi had taken up the case suo-moto after reports about suspected fraud at the CG Power in August 2019.
"... noticees herein, acted in concert in order to execute a fraudulent scheme of diversion of funds or creating encumbrances of assets of a listed entity. In the said scheme each noticee played its assigned role in order to give these transactions a colour different from the one which they actually hold.
"In this process, they exceeded their authority, they exercised authority which was not vested in them and misused the authority given to them," Sebi said.
As a result of their acts, Sebi said the company's total liabilities and that of CG Power Group may have been potentially understated by around ₹1,053.54 crore and ₹1,608.17 crore, respectively, as on March 31, 2018 and by ₹601.83 crore and ₹401.83 crore, respectively, as on April 1, 2017.
Earlier, the regulator had issued two interim orders, whereby it had restrained Thapar, Venkatesh, Acharya and Hariharan and three entities -- Avantha Holdings, Acton Global and Solaris Industrial Chemicals -- from the securities market till further orders.
The regulator found the entities to be prima facie the beneficiaries of the loans and advances extended by the company and were directed to retain funds and other assets to the extent of receivables shown as outstanding to CG Power.
In the second interim order, BSE was directed by Sebi to appoint an independent audit firm for conducting a detailed forensic audit of the books of the account from the FY 2015-16 till September 2019.
Subsequently, a detailed probe was conducted by Sebi on the findings contained in the forensic audit report dated March 18, 2020.
The regulator found that Thapar, along with certain directors of CG Power and related entities, had perpetrated certain irregularities. These include use of certain assets of the company as collateral, including being co-borrower for enabling third parties to obtain loans without due authorisation from the board of CG Power.
They allegedly routed transactions through subsidiaries, promoter-affiliated companies and other connected parties for the ultimate benefit of companies related to the then promoter group, as per Sebi.
Further, they allegedly used different accounting heads for concealing payments made by CG Power and facilitated interest free-advances to promoter-affiliated companies, the regulator noted.