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CG Power seeks govt's nod to remove joint auditor
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SME Times News Bureau | 25 Jan, 2020
Fraud-hit CG Power and Industrial Solutions has sought the Centre's
approval to remove K K Mankeshwar & Co (KKM) as one of its joint
auditors due to certain alleged "unexplained" payments made to the
auditor from the company.
In a regulatory filing, CG Power on
Friday evening said that its Board of Directors has determined that KKM
cannot be considered to be independent.
"In the course of review
of payments made in the past years, the Company has come across certain
unexplained payments made to M/s K K Mankeshwar & Co, one of the
Joint Auditors of the Company (KKM), from the Company and its
subsidiaries as well association of its partner with certain identified
entities named in Phase-I investigation report ('Identified Entities'),"
it said.
The filing further said that KKM in its response
confirmed the association of one of its partners with the identified
entities during the year 2016-17 which was not disclosed at the time to
appointment of KKM as statutory auditors for the financial year 2017-18.
However, it added: "They have stated it had not received any
payments other than in capacity of statutory auditors, though it has
been found that significant unexplained payments were made to KKM and
its related entities during 2016-17 to 2018-19."
Consequently,
the Risk and Audit Committee (RAC) issued show cause under Section 140
(1) of the Companies Act, 2013 and provided KKM opportunity of being
heard, it said, adding that despite follow up and reminders no
submissions were made by KKM on the show cause notice."
The filing further said that the auditor is now not considered independent and the process of its removal has started.
The
company had last August disclosed the findings of RAC which revealed
that the firm and the group together could have under-reported Rs 3,600
crore liabilities in financial years 2017 and 2018.
Erstwhile CG
Power Chairman Gautam Thapar, CFO V.R. Venkatesh and others were removed
from the company board in August over alleged under-reporting and
siphoning of money to Thapar's other firms. They were eventually barred
from the stock markets and Thapar was also summoned by the MCA.
The
Ministry of Corporate Affairs had ordered a probe by the Serious Fraud
Investigation Office (SFIO) into the matter and also approached the NCLT
seeking to reopen the financial statements of CG Power Industrial
Solutions for 2015-19 on the basis of the company's announcement about
financial irregularities.
The Mumbai-bench of the National
Company Law Tribunal (NCLT) on Thursday reserved the order on the MCA's
plea to reopen its books.
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