Avantha Holdings Limited & Anr v. Union of India & Ors

Judgment Delivered on:

08.09.2025

+

W.P.(C) 274/2023

AVANTHA HOLDINGS LIMITED & ANR.

.Petitioner s Through:

Mr. Krishnan Venugopal, Sr. Adv. with Dr. Sushil Kumar Gupta, Ms. Suni ta Gupta and Mr. Sakshit Bhardwaj, Advs.

versus

UNION OF INDIA & ORS.

.Respondent s Through:

Mr. Sandep Kumar Mahapatra, CGSC with Mr. Tribhuvam, Adv. for R - 1/UOI.

Mr. Sanjev Sagar, Sr. Adv. with Ms. Nazia Parven and Mr. Akash Gahlot, Advs. f or R - 3/SBI.

Mr. Malak Bhat, Ms. Neha Nagpal and Ms. Nitya Prabhakar, Advs. for R -

4.

CORAM:

HON'BLE MR. JUSTICE VIKAS MAHAJAN

JUDGMENT

VIKAS MAHAJAN, J

¶1The writ petition , as initialy filed , sought the relief of declaration to the efect that r eport dat ed 27.04.2020 [hereafter "Pipara prepared by respondent no.4/Pipara & Co. [ comisioned and prepared under the aegis of respondent no.3/State Bank of India (SBI) is void and canot be relied upon being in complete breach of t he principles of natural justice. The petitioners also sought seting aside and quashing of the Pipara Report.

¶2During the pendency of present petition, respondent no.3/SBI had

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brought on record the declaration as fraud dated

29.05.2020 under Reserve Bank o f India (Frauds clasification and reporting by comercial banks and select FIs) Directions 20 16 [hereafter "Master s on Frauds respect of the acount o f CG Power and Industrial Solutions Ltd. [hereafter "CG Power' ] . P etitioners sought to ins ert the prayer seking quashing and set ting aside of the said declaration of the acount of CG Power to the extent it concerns the transactions undertaken during the period when petitioners were promoters and directors of CG Power.

¶3The case set out in the present petition is that in the year 2017, KR Consortium [hereafter " KKR' ] lent an amount of Rs.90 crores to petitioner no.1 and the same was secured by a pledge of 2% shares of CG Power where petitioner no.1 had 34% of shareholding.

¶4On 08.03.2019, KR invoked the pledge of about 10.8% shares of CG Power , thereby acquiring the share s of CG Power. The balance 10.8 % shares of CG Power were invoked on 20.03.2019.

¶5Simultaneously, on 08.03.2019 itself, an "Operations Com formed consisting of Mr. Narayan Seshadri (also apointed as an Aditional and Non - Executive Independent Director at CG Power) , Mr. K.N. Nelkant and Mr. Sudhir Mathur selected by KR to focus on operational improvement and restructuring. On the same very day, petitioner no.2 resi gned as Non - Executive Director of CG Power .

¶6Subsequently, on 24.04.2019, Operations Comite of CG Power apointed Vaish Asociates, Advocates to investigate aleged iregularities

with regard to certain transactions of CG Power . Vaish Asociates in turn apointed Deloite to conduct an acounting - focused investigation. Incidentaly, Deloite was also the global auditor of KR. Deloite submited

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its report to Vaish Asociates, Advocates on 05.08.2019 and Vaish Asociates submited the same to CG Power on the same day.

¶7Sequel to above, CG Power on 19.08.2019 made a disclosure to Bombay Stock Exchange

(BSE)

aleging certain iregularities and understatement of related party transactions in the boks of acounts of CG Power for the period 2015 - 19, based on t he analysis of the Vaish Report by Mr. Narayan Seshadri and Mr. Sudhir Mathur. Furthermore, on 2.08.2019, a meting of the lenders of CG Power was convened wherein Mr. Mathur, representing CG Power, reafirmed the veracity of the disclosure.

¶8On 30.08.2019 , a circular resolution initiated by Mr. Mathur for removal of Mr. Gautam Thapar as Chairman of CG Power Board was circulated and aproved . Subsequently, the lenders were informed about the change in the management of CG Power.

¶9The lenders, thereafter, dec ided to initiate a Resolution Proces as per the guidelines contained in RBI circular dated 07.06.2019 and the date of default was fixed as 27.08.2019. A subsequent joint lenders meting was held on 27.09.2019 wherein it was aparently decided that SBI wou ld apoint a forensic auditor to conduct forensic audit of CG Power for the period 01.04.2015 to 31.08.2019.

10.

Acordingly, SBI apointed respondent no.4/ Pipara as the Forensic Auditor, and on 30.09.2019, the ac the bas is of disclosures made to SBI vide disclosure dated 19.08.2019.

1.

In the meanwhile, Securities and Exchange Board of India (SEBI) on

17.09.2019 had directed BSE to apoint an independent auditor for conducting a detailed forensic audit of boks of acounts o f CG Power for the Financial Year s 2015 - 19. Acordingly, BSE vide its leter dated

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10.10.2019 asigned MSA Probe Consulting Pvt. Ltd. to conduct forensic audit of CG Power for the relevant period.

12.

MSA Probe Consulting Pvt. Ltd. submited its final forensi c audit report to SEBI on 18.03.2020 thereby highlighting its observation on each of the transactions. Likewise, forensic auditor Pipara , on 27.04.2020 , submited its final report to SBI.

13.

A joint lenders meting was convened wherein the Pipara R eport was tabled. It was informed to lenders that as per the R eport , conclusion drawn

was that fraud had ben comited . The report was adopted by majority of lenders. Subsequently, respondent no.3/SBI clasif ied the acount of CG Power as fraud vide impugned resolu tion dated 29.05.2020, based on forensic audit conducted by M/s Pipara & Co.

14.

Later, on a complaint filed by SBI, CBI registered FIR dated

2.06.2021 against petitioner no.2 and others under Section 120B read with Sections 406, 420, 467, 468, 471, 47A IPC and Section 13(2) read with Section 13(1)(d) of PC Act, 198.

15.

The petitioners , thereafter , filed a writ petition being W.P.(C) 1235/2021 seking isuance of writ of mandamus directing respondent nos.3 and 4 to provide a copy of the said report dated 27.0

4.2020 to petitioners. This Court vide order dated 07.03.202 alowed the writ petition and directed respondent no.3/SBI to suply a copy of the said report to petitioners. The same was subsequently complied with and copy of the report was furnished to pet itioners.

16.

Pursuant to the above, petitioners filed the present writ petition in January, 2023, inter alia, praying for declaration to the efect that Pipara Report is void and further seking to quash and set aside the same.

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17.

The present writ petition, as noted above, was sought to be amended to lay a chalenge against impugned declaration o f acount of CG Power as fraud . The reason put forth in the aplication seking amendment was that during the pendency of writ petition, petitioners were made aware tha t the acount of CG Po wer has ben declared as fraud when respondent no.3/SBI had raised an objection regarding the maintainability of writ petition on the ground that petitioners had not chalenged the declaration of fraud dated

29.05.2020 , which was cons equent to the forensic audit report by respondent no.4/Pipara.

18.

The aplication seking amendment of writ petition was alowed by this Court on 10.1.2023.

19.

Thus, petitioners in the present petition esentialy asail the Pipara Report , as wel as , SBI's dec ision to decla re CG Power's acc .

20.

Mr. Krishnan Venugopal, the learned Senior Counsel apearing on behalf of the petitioners asails the forensic audit report, inter alia , on the folowing grounds:

(i)

A t the time of forensic audit and fraud declar ation, the borower i.e. CG Power was under a new management .

(i) The new management, after comple tely ousting the old management, had complained to the lenders in September, 2019 about the functioning of the old management during the period 01.04.2014 to 31.

08.2019.

(i) O nly the new management of borower CG Power was involved in the preparation of Pipara Report.

(iv) On the other hand, the information and documents actualy given by the old management were rejected by respondent no.4/Pipara on the ground that only CG Power was required to be heard.

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21.

To butres his contention, Mr. Venugopal has invited atention of the Court, inter alia, to the folowing excerpts of the report:

—This document has ben prepared by M/s. Pipara & Co LP based on the analysis of various records, information, details, documents etc. provided to us b

x

x

x

On 5 th February, 2020, after incorporating al the changes, based on coments/evidences provided by various lenders, the report of the Forensic Audit of CG PISL was shared with the present management. …."

2.

He submits that i n regard to the information provided by M/s Bharucha and Partners, Advocates and Solicitors for and on behalf of their client Mr. Gautam Thapar, folowing observations have ben made in the Pip ara Report, which show that the documents provided by Mr. Gautam Thapar , erstwhile Chairperson of CG Power, were not considered only on the ground that the same were not received through CG Power:

—We have looked into the inform

Thapar through Bharucha & Partners, Advocates & Solicitors, as per their leter dated 6th February, 2020. At the outset we are not in a position to rely upon the said information/submision/evidences, as the same has ben suplied in the individual capaci ty of Mr. Gautam Thapar and same has not received through the Company. Further al these papers/corespondence is pertaining to investigation caried out by the SEBI and therefore, being the mater already under investigation, it may not be apropriate for us to enter into the same as we do not have any authority to deal with the same nor legally bound, as it is beyond

23.

Likewise, the documents furnished by petitioner no.2 were not considered in the Pipara Report as the same were not giv en through CG Power. Mr. Venugopal has also drawn atention of the Court to the observations in the report to the efect that it is the curent management that

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had provided al the available information to the auditors.

24.

He submits that the curent manageme nt coperated with Pipara & Co . (forensic auditors) to the extent it suited them. He contends that the new

W.P.(C) 274/2023 Page 1 of * IN THE HIGH COURT OF DELHI AT NEW DELHI %