The ministry of corporate affairs (MCA) has ordered a probe against Gensol Engineering and its affiliate firm BluSmart Mobility for alleged violation of corporate governance norms under the Companies Act. A report will be submitted to the government, following the investigation, which will be concluded in three months.
The investigation, which has been ordered under Section 210 of the Companies Act, will focus specifically on the fund diversion allegations that were highlighted in the Securities and Exchange Board of India (SEBI’s) interim report on Gensol in mid-April.
Experts said Section 210 of the act gives powers to the Centre to order an investigation under three conditions, and in this case, the order has come due to “public interest”. “A probe to ascertain Companies Act breaches demands MCA to nominate inspector(s) with requisite expertise in the fields of investigation, forensics, financial accounting etc. who will probe into the books of the company in addition to the bank accounts, demat accounts and assets of company directors, key managerial personnel (KMP) and even auditors,” said a company law expert.
“Based on the size of the fraud, the matter can be referred to either Serious Fraud Investigation Office (SFIO) or National Company Law Tribunal (NCLT). MCA needs an adjudicating authority to act upon the report of the inspectors,” said said GP Madaan, managing partner, Madaan Law Offices.
Gensol’s fraud caught the market regulator’s attention in 2024 when it received a complaint relating to manipulation of share price and diversion of funds in the company.
SEBI called for information from credit rating agencies ICRA and CARE who had downgraded Gensol as certain documents shared by the company on its debt servicing track record were apparently falsified. During the probe, the ratings agencies told SEBI that when they sought term loan statements, Gensol provided statements of all lenders except those of IREDA and PFC. For these two lenders, Gensol shared conduct letters purportedly issued by IREDA and PFC which stated that Gensol was regular in its debt servicing. Upon seeking confirmation from IREDA and PFC, rating agencies were told that no such letters were issued by them.
On April 15 this year, SEBI issued an interim order that restrained the promoters of Gensol – Anmol Singh Jaggi and Puneet Singh Jaggi – from holding any KMPs in the company besides barring them from dealing in securities market over their alleged involvement in fraudulent activities. In its order, SEBI said that Gensol attempted to mislead it, credit ratings agencies, lenders and investors by submitting forged conduct letters purportedly issued by its lenders.
Additionally, the SEBI probe revealed that funds availed by Gensol as loans for procuring electric vehicles were partly utilised for buying a high-end apartment in The Camellias, DLF Gurgoan in the name of a firm where the MD of Gensol and his brother are designated partners. In addition, the diverted funds were used for personal luxury expenses such as golf set, travel and shopping.