NCLT allows Centre's plea to re-open accounts of CG Power & Industrial Solutions

The National Company Law Tribunal, Mumbai today allowed the Central Government’s plea to re-open the accounts of CG Power and Industrial Solutions from the 2014-2015 to 2019-2019. (UOI vs CG Power and Industrial Solutions & Ors).CG Power and Industrial Solutions is facing an investigation by the Serious Fraud Investigation Office (SFIO) and the Securities and Exchange Board of Idnia (SEBI) for financial irregularities. The irregularities had surfaced after the new management of the company discovered major governance and financial lapses and declared the same before NSE. As per reports, the financial loss to the company due to the lapses was around Rs 3,300 crore..While ordering the re-opening of the books of account for the last five years, the NCLT stated,.“The point to be remembered here is that even a doubt on the fairness of financial statements is enough for this tribunal to order for re-opening and recasting of the financial statements.”NCLT.The order was passed by a two-member Bench of Member (Judicial) Bhaskara Pantula Mohan and Member (Technical) Rajesh Sharma in a Petition filed by the Ministry of Corporate Affairs, Government of India against CG Powers seeking relief under section 130 of the Companies Act, 2013..The NCLT opined that the allegations made against the promoter of CG Powers, Gautam Thapar and other parties were very serious in nature..It added that the seriousness with which the Central Government was “pursuing this matter” spoke volumes about the alleged irregularities in the company..The NCLT, therefore, stated that in order to bring out the truth i.e. whether any irregularities were committed or not, it was essential the “entire affairs of the Company” were investigated by the Government or its agencies..The Court also took into account the ouster of Thapapr from the post of CG Power’s Chairman and remarked that from the submissions made before it, it seemed that there was an “internal fight” between Thapar and the present management of CG Power..It said,“The reason for the internal fight is yet to be established but however, the complainant in the whole episode is none other than the existing management. When there are serious differences existing between two parties, there are provisions in the Companies Act to seek a proper remedy under the law. But in a strange manner the present management had gone to the stock exchanges and declared about the so called irregularities purported to have taken place in the Respondent No. 1 Company.”.The NCLT thus concluded that Government machinery could not be used by either of the conflicting parties to settle their scores and instead a fair and impartial inquiry should be allowed to be conducted by the government agencies to know the real facts..The NCLT also took on record the inquiry report submitted by a Legal firm and also an Auditors’ firm, called the Vaish Report and ordered that the Report shall not be the sole basis to establish fraud or irregularities, unless, corroborated with the inspection/investigation report of an independent government agency..It said,“The investigating agency should also look into the involvement of Ex-Chairman, Directors, Key Managerial Persons (KMPs) and other staff of the Respondent No. 1 Company and its subsidiary companies who were involved in committing fraud or irregularities, irrespective of the fact, whether they ceased to be involved in the affairs of the Respondent No. 1 Company or its subsidiary companies, or still continuing.”.In view of the above, the NCLT ordered,.“We are of the considerate view, after hearing all the parties concerned, that the permission is hereby accorded to the Applicant for re-opening of the books of accounts and recasting of the financial statements of the Respondent No. 1 Company and its subsidiary Companies for the past 5 (five) years.”NCLT.The NCLT also clarified that the report of the investigating agency will also be considered while submitting the recasted accounts for suitable orders..The NCLT further stated that based on the outcome of investigation, due action should be initiated against the erring/defaulting individuals who found involved in fraud and irregularities while conducting the affairs of the CG Power. .Centre was represented by Regional Director Manmohan Juneja, Director (L&P) Sanjay Shorey, Joint Director Rakesh Tiwari, Assistant Director Parvez Naikwadi and Company Prosecutor Megha Gupta..CG Power was represented by Advocate Piyush Raheja with Advocates Pratik Pawar, Shanaya Cyrus and J Sagar Associates..Gautam Thapar was represented by Senior Counsel JJ Bhatt with Advocates Nihar Mody, MP Bharucha, Sneha Jaisingh, Anniruddha Banerjee and Bharucha & Partners..Read the Order: