The Securities and Exchange Board of India (SEBI) has imposed a ban on Gensol Engineering Ltd (GEL) and its promoters, Anmol Singh Jaggi and Puneet Singh Jaggi, restricting their access to the securities markets indefinitely. This decisive action follows alarming allegations of fund misappropriation and significant corporate governance issues within the company.

SEBI’s Interim Order and Its Implications

In a detailed 29-page interim order released on Tuesday, SEBI prohibited the two promoter-directors from holding any directorial or key management roles at Gensol while an investigation is underway. Moreover, the regulator has mandated Gensol to halt its recently announced stock split, adding another layer of scrutiny to its operations.

Allegations of Fund Diversion

The allegations suggest that substantial funds from Gensol were misappropriated for personal gain by entities associated with the promoters. A staggering ₹42.94 crore drawn from a larger loan acquired by Gensol was allegedly funneled through Capbridge Ventures, a company controlled by Anmol Singh Jaggi, to finance the purchase of a luxurious apartment in DLF Camellias. Additionally, it is claimed that Jaggi diverted ₹50 lakh of these funds into Ashneer Grover’s startup, Third Unicorn, along with other personal expenditures, including travel.

• Key financial misappropriations include:
  • ₹42.94 crore for a luxury apartment.
  • ₹50 lakh invested in a startup.
  • Significant personal expenses and transactions.

Investigation Triggered by Complaints

SEBI’s investigation was initiated following a complaint lodged in June 2024, which highlighted potential share price manipulation and the misappropriation of company funds. The findings suggest a “prima facie” case of fraudulent fund diversion orchestrated by the Jaggi brothers, the main beneficiaries of the misallocated money.

Details of the Financial Transactions

The order reveals that funds meant for acquiring electric vehicles were instead redirected through a complex network of transactions to finance luxury purchases. Gensol initially secured a ₹93.88 crore loan from the Indian Renewable Energy Development Agency (IREDA), a portion of which was transferred to Go-Auto Private Ltd. Out of this, ₹50 crore was subsequently routed to Capbridge Ventures LLP, leading to the luxury apartment purchase.

SEBI’s Findings on Corporate Governance

SEBI has raised serious concerns about the internal controls at Gensol, accusing the company of presenting forged documents purportedly from its lenders to mislead both the regulator and investors.

• “There is clear evidence of a complete breakdown of internal controls and corporate governance norms,” SEBI stated in its order.
• The regulator emphasized that the company’s funds were misused as if they belonged to the promoters personally, suggesting potential future financial losses for Gensol’s investors.

Conclusion

As the investigation continues, the implications of SEBI’s findings could have significant repercussions for Gensol Engineering Ltd and its management. Stakeholders and investors are urged to stay informed about developments in this ongoing case, as it highlights the critical importance of corporate governance and ethical financial practices in the business landscape.