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.