Adani Power violated Companies Act in two cases, rules Registrar of Companies
In one case, the firm has been found guilty of not disclosing related-party transactions. In the other, it was fined for delay in filing annual returns.
The Gautam Adani-led Adani Power has violated provisions of the Companies Act in two separate matters, the Gujarat office of the Registrar of Companies adjudicated earlier this month.
In the first case, the company has been held guilty of not disclosing related-party transactions over three financial years – 2017-’18, 2018-’19 and 2019-’20. The Registrar of Companies has imposed a fine of Rs 75,000 each on three executives of the company, including chairperson Gautam Adani.
In the other case, Adani Power has been found guilty of delay in filing annual returns for the financial years 2014-’15 and 2016-’17. In this matter, Adani Power as a company and three of its officials have been fined Rs 10,200 each.
Both the orders were passed on May 8 and they were made public on May 15.
Non-disclosure of related-party transactions
Under Section 189 of the Companies Act, firms are required to make disclosures about contracts that they enter into. In his order, RC Mishra, the adjudicating officer of the Registrar of Companies, Gujarat, held that Adani Power had failed to do so for various related-party transactions over three financial years between 2017 and 2020.
Related-party transactions are arrangements between two parties that already have a business relationship, according to Investopedia. Such transactions are required to be recorded and disclosed to the authorities and the board of the company to avoid conflict of interest.
However, a caveat in the Companies Act allows firms not to disclose related-party transactions in cases of contracts entered at an “arm’s length”. To avail this relief, companies need to prove that the parties involved in such transactions were unrelated and therefore, conflict of interest was not possible.
Adani Power had claimed to have submitted documents to prove that the transactions had been carried out at an “arm’s length”. However, Registrar of Companies held that the billionaire’s firm had failed to do so and was in violation of the Companies Act.
Gautam Adani, his younger brother Rajesh Adani and Adani Power Chief Executive Officer Vneet S Jaain have been fined Rs 75,000 each in this case.
Delay in filing returns
Under Section 92(4) of the Companies Act, firms are mandated to submit a copy of the annual return with the Registrar of Companies within 60 days of its annual general meeting.
For two financial years, 2014-’15 and 2016-’17, Adani Power did not include details of shareholders in the annual return that it had submitted, the Registrar of Companies held in its ruling in the second case.
Besides the company itself, the registrar has imposed a fine of Rs 10,200 each on Rajesh Adani, Vneet S Jaain, the firm’s Chief Financial Officer Vinod Bhandawat and the Company Secretary Deepakbhai Pandya.
On Monday, Congress MP Jairam Ramesh shared a news report on the judgement against Adani Power, saying that it was evidence of the conglomerate “duping minority shareholders and unfairly enriching the promoters”.
The verdict of the Registrar of Companies came to light days after an expert panel constituted by the Supreme Court to oversee investigations into the Adani Group said that prima facie it was not possible to conclude whether there had been any regulatory failure in the case.
The panel was formed in March to conduct an inquiry after American firm Hindenburg Research in a report on January 24 alleged that billionaire Gautam Adani’s group was pulling off the “largest con in corporate history”.
The company claimed that the conglomerate has been involved in accounting fraud, improper use of tax havens and money laundering. The Adani Group has rejected these allegations but the report still pummeled the stocks of the conglomerate’s listed companies.