New Delhi: An investigation that unearthed a multi-crore financial scam in the firm has caused the board of CG Power & Industrial Solutions to sack its chairman Gautam Thapar with immediate effect.

On Thursday, the company in a regulatory filing announced the decision made by the board, stating, "In cognizance of the current situation being faced by the company and the recent developments, including disclosures dated August 19, 2019, made by the company, the board of directors... passed by majority consent, have resolved to remove Gautam Thapar as the chairman of the board with immediate effect."

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CG Power said this decision has been taken in the interests of the company and its stakeholders in discharge of the fiduciary responsibilities of the board.

According to a statement, on August 20, the company’s board had instituted an investigation which revealed that there were major governance and financial lapses including some assets being provided as collateral and the money from the loans siphoned off by "identified company personnel, both current and past, including certain non-executive directors."

Also, some liabilities and advances to related and unrelated parties had been understated.

The board had sent CEO and managing director KN Neelkant on leave on May 10, pending an investigation into some "suspect, unauthorised and undisclosed" transaction. However, Thapar continued to be the company chairman.

Thapar has only 8,574 shares out of 62.6 crore shares of the company. Though a founder promoter of CG Power, he lost almost all of his shares after lenders, in past years, invoked pledges he had created to borrow money.

Stating that further investigation would be conducted, CG Power revealed the transactions appear to be undertaken in a "seemingly fraudulent manner".

It had stated that the company's current and past employees, including unnamed non-executive directors and certain key managerial personnel (KMP) obtained loans without due authorisation, by providing certain assets of the company as collateral, making the firm a co-borrower or guarantor.

The funds so raised were routed out of the company for two years now, the company said.

Advances to related and unrelated parties of the company and group may have been potentially understated by Rs 1,990.36 crore and Rs 2,806.63 crore, respectively, as on March 31, 2018, and by Rs 1,479.34 crore and Rs 1,331.47 crore, respectively, as on April 1, 2017, a regulatory filing had said.

According to the filing, recovery of these amounts together with interest will be evaluated with appropriate legal inputs.

Also, total liabilities of the company and group may have been potentially understated by Rs 1,053.54 crore and Rs 1,608.17 crore, respectively, as on March 31, 2018, and by Rs 601.83 crore and Rs 401.83 crore, respectively, as on April 1, 2017, it noted.

These transactions, the filing said, appear to have been carried out by various means, including inappropriate netting off using ostensibly unrelated third parties, routing transactions through subsidiaries, promoter affiliated companies and other connected parties.

The company now plans to conduct a detailed forensic investigation to establish wrongdoing.

Yes Bank owns 12.79% of CG Power, after it had invoked shares pledged by Thapar's Avantha Holdings Ltd in May. Mutual funds such as HDFC Asset Management Co and Aditya Birla Sun Life AMC Ltd as well as Life Insurance Corp (LIC) are shareholders of CG Power.

Shares of CG Power were trading 4.74% higher at Rs 9.95 apiece on BSE.