Fraud-hit CG Power and Industrial Solutions CEO K N Neelkant has quit from all the subsidiaries of the company as investors mount pressure for his ouster for the alleged irregularities happening under his watch, sources privy to the development said. Neelkant confirmed resigning from the subsidiaries but said he believed that investors and lenders would not want him to step down from CG Power in the "best interest" of the company.

Late last month, the board of CG Power removed its founder Gautam Thapar as chairman following an investigation unearthing a multi-crore financial fraud in the company.

Sources said investors and lenders want clean-up of the company and so forced Thapar out. They want completely new management to run CG Power, for which they believe Neelkant to go, sources said.

The company's board had on May 10 sent Neelkant on leave pending an investigation into some "suspect, unauthorised and undisclosed" transaction. The investigation found that some assets were provided as collateral and the money from the loans siphoned off by "identified company personnel, both current and past, including certain non-executive directors". The money was siphoned off through some of the subsidiaries of the company, from which Neelkant has resigned, they said.

Reached for comments, Neelkant said, "Based on analyst calls, the key investors are rather concerned about the operations which have been growing profitably and significantly faster than the market in the last few years, since my assuming the position of MD and CEO of CG Power."

"On the contrary (to investors seeking my ouster), there has in fact been inquiries on, as to when would I be back into the operations. Thus, the same leads me to believe that the investors and lenders in the best interest of the company would not be keen to have me to step down," he said.

He said the operations committee of the company, of which he was part, had set up an independent investigation around March-April 2019.

"Thereafter in board meeting held on May 10, 2019, the board suggested that since there was an ongoing investigation, it would be fair and equitable that till such time it is concluded, I, being the MD and CEO, recuse myself from the operations and management of the company for the said period. This suggestion was duly accepted by me to support the idea of fair investigation in the best interest of the company," he said.

And, since the subsidiary companies are part of operations, "it was but prudent that in view of the same, I resign from all CG subsidiary boards as well," he said adding that he had "stepped down from all subsidiaries and joint ventures for the same reason".

He said the second phase of investigation or forensic audit has commenced and, hence, he continues to recuse himself "as before till the time the same is concluded for the same purpose."

"Besides, as regards the findings on the transactions in the report, I can only provide a comment limited to myself and that as is the fact which is also reflected in the said report, neither have I been named as a person involved nor as a person being a beneficiary of any of the alleged transactions," he said.

Neelkant had abstained from voting on the resolution to remove Thapar as the company's chairman. The resolution was carried by a majority vote of the members of the board, the company had said on August 29.

Sources said the board has not yet named a replacement for Thapar as they want a completely clean slate.

After his removal, Thapar had stated that "no promoter or promoter entity has derived any undue benefit. There is simply no fraud". He reportedly has sent a legal notice to the company board.

"In the interests of all stakeholders, including banks and financial institutions, I must say that no funds lent by banks nor any funds of CG have been misappropriated. The money has been applied with due board approval. All inter-corporate transactions have been fully authorised by the board," he had said.

The company had, in a regulatory filing last month, stated that an investigation instituted by its board had found major governance and financial lapses, including that some liabilities and advances to related and unrelated parties had been understated.

While the regulatory filing had not named anyone involved in the scam, the sources said the investigation had found strong links to the current management.

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