CG Power and Industrial Solutions Asked To Pay Rs5 Lakh Fine for Failing To Disclose Loan Defaults
Moneylife Digital Team 26 December 2022
CG Power and Industrial Solutions Ltd (CGPISL), previously known as Crompton Greaves Ltd, has been imposed with a fine of Rs5 lakh by market regulator Securities and Exchange Board of India (SEBI) for not disclosing loan default on due dates.
In a 17-page order issued last week, G Ramar, adjudicating officer (AO) of SEBI says, “If any person/company who is to make such a filing does not make it and is depriving the investing public of the statutory rights available to them, then SEBI is duty-bound to ensure that the investing public is not deprived of any statutory rights available to them. Thus, in the present matter, the facts of the case clearly bring out the default made by the CGIPSL. Hence, I note that the CGIPL failed to make timely disclosures about the loan defaults to the exchanges and also failed to make the disclosure for the quarter ending March 2020 in the specified form and thereby has violated the relevant provisions LODR Regulations, Listing Agreement, SCRA and SEBI.”
CGIPSL failed to disclose the defaults in the repayment of principal and payment of interest on loans from banks and financial institutions in January 2020. The company delayed in placing before its board of directors the information pertaining to default in loans from 27 August 2019 up to 27 June 2020.
SEBI asked the company remit within 45 days the Rs5 lakh penalty as per Section 23E of the Securities Contracts Regulation Act, 1956 (SCRA).
During the hearing, CGIPL contended that its former management was replaced by new management and the company should be excluded from proceedings as defaults committed by former management cannot be used against them as per Insolvency and Bankrupt Code (IBC) 2016. The company described itself as the victim of the faults of previous management. It argued that since the new management is in charge and they cannot be blamed as they disclosed the default loans on the very next day of their appointment.
However, Mr Ramar from SEBI rejected the contention of CGIPL, pointing out that the disclosures of default dated 31 December 2019 and 31 March 2020 were only done on 27 June 2020. 
Contradicting the claims of CGIPL, the AO of SEBI noted 16 meetings of the board of directors of the CGIPL were held between 30 August 2019 and 3 June 2020. These happened between the date of default, i.e., 27 August 2019 to the date of the meeting in which disclosure was placed, i.e., 27 June 2020.
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