Crisis-ridden CG Power and Industrial Solutions has snapped its royalty agreement with Avantha Holdings Ltd (AHL).
"The company has intimated AHL of rescinding the royalty agreement and consequently does not have any liability towards payment of brand royalty including the monetisation proposal," CG Power said in a statement.
As per the royalty agreement, a 50 per cent brand loyalty was to be paid by CG Power to AHL in perpetuity aggregating to Rs 411.2 crore.
This was for the part settlement of outstanding loans due from Avantha group of companies and for reducing the regular royalty payments to 0.5 per cent of the company's annual consolidated net operating revenues, it added in the statement.
In September, the Securities and Exchange Board of India (SEBI) had debarred its ousted Chairman Gautam Thapar from accessing the capital market for several alleged irregularities, including diversion of money.
The SEBI order came nearly a month after the CG Power board said the company had been hit by an accounting scandal and liabilities of the group were understated by over Rs 1,600 crore for 2017-18.
Thapar was sacked by the board of directors on August 29. A day later, the troubled company also removed V R Venkatesh as the Chief Financial Officer for irregularities and unauthorised transactions.
After CG Power's disclosure of significant accounting irregularities, SEBI met company officials and studied the preliminary investigation report. SEBI's examination of the report showed several irregularities and fraudulent transactions being carried out by key officials, including Thapar.
"Funds diverted from CG Power were fraudulently transferred to its promoter company Avantha Holdings and entities related or connected with the company, Avantha International, Acton, Ballarpur International, Mirabelle and Solaris without the knowledge of the company and without any approval from its board," said SEBI.
CG Power reported narrowing of consolidated net loss in the July to September quarter to Rs 61.47 crore from Rs 101.83 crore in the same period of previous year.
The company has business interests in diverse areas including pulp and paper, power transmission and distribution equipment and services, food processing, farm forestry, chemicals, energy, infrastructure, information technology (IT) and IT-enabled services.
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