CG Power plans to re-examine accounts of previous three years
CG Power had in August stated that an investigation instituted by its board 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 person...
A recent investigation by the company revealed that the nine wrongful transactions caused the company to lose around.`3,000 crore. ET was the first to report this. CG Power said that FY19 financial statements are stated not to reflect true and fair view, and that the statutory auditors have expressed their inability to express an opinion on such financial statements.
“We are conducting a more comprehensive investigation and the aim is to clean up the financial statements. The decision to open previous years’ statements is to make sure any other financial irregularity is accounted for so that our auditors can have a clean view, which they are unable to do right now,” a board member, on the condition of anonymity, told ET on Tuesday.
The board of directors of the company proposes to reopen accounts of the three previous financial years for preparation and submission of true and fair financial statements,the company said in a statement to the stock exchanges. “Following Phase 1 and ongoing Phase 2 investigations, there appears to be several transactions which have not been appropriately accounted for and disclosed in the past years," the company said in the statement.
In April, an operations committee formed by CG Power's board was informed of some irregular transactions that were executed by the erstwhile top brass without following due processes and board approvals. Later, the company appointed law firm Vaish Associates, which found that at least nine likely diversions were made, leading to a Rs 3,000-crore loss to CG. While the company has undertaken a second phase of more indepth forensic investigation, the matter has been escalated to the Serious Fraud Investigation Office (SFIO) by a top regional official at the Ministry of Corporate Affairs.
CG Power said that the second phase of investigation is expected to be completed by the fourth quarter of the current fiscal year. The board has been in marathon meetings since Monday and sent the statement to the bourses on Tuesday. The board also approved withdrawing the plan to merge with self CG Power Solutions (CGPSol), a wholly owned subsidiary, on account of the findings of the 'Phase I' investigations that revealed the subsidiary company’s involvement in unauthorised and undisclosed transactions.
The board also noted the execution of the Inter Creditor Agreement by nine lenders out of a total fourteen, constituting 87.68 % of total outstanding credit facilities of the company by value. The company said that it has issued recovery notices to seven entities for repayment of Rs 1,314.78 crore owed by them to the company. Three of these notices (representing an amount Rs 452.12 crore) have been returned undelivered, while notices for claims of Rs 74.63 crore could not be sent for want of requisite details, including the address for correspondence.