On Monday, the Ministry of Corporate Affairs (MCA) announced that it is currently reviewing the interim order issued by the Securities and Exchange Board of India (SEBI) concerning Gensol Engineering. The ministry emphasized that it would take necessary actions in alignment with the Companies Act of 2013. Officials indicated that "appropriate measures would be implemented accordingly."

Preliminary Investigations Underway

Industry experts suggest that due to the severity of the alleged fraud, the MCA will likely carry out an initial investigation. This step could lead to a referral to the Serious Fraud Investigation Office (SFIO).

• The MCA will scrutinize:
  • Related party transactions (RPTs)
  • Fund diversion activities
  • Financial statement disclosures
  • Board reports

Furthermore, the findings of statutory and secretarial auditors will also be examined. If any discrepancies are found, the MCA might escalate the matter to the National Financial Reporting Authority, which oversees audit standards.

Independent Directors Under Scrutiny

G.P. Madaan, managing partner at Madaan Law Offices, noted that the role of Gensol’s independent directors will also be closely analyzed. This comprehensive approach aims to uncover any potential lapses in governance and accountability.

The scrutiny of Gensol Engineering began in 2024 when SEBI received complaints about alleged share price manipulation and the misappropriation of funds within the company.

SEBI’s Findings on Gensol Engineering

SEBI has reached out to credit rating agencies ICRA and CARE due to significant concerns over Gensol’s claims regarding its debt servicing history. During investigations, it was revealed that Gensol provided misleading documentation to these agencies, including conduct letters from lenders that were later disproven.

In an interim order issued on April 15, SEBI prohibited Gensol’s promoters—Anmol Singh Jaggi and Puneet Singh Jaggi—from holding any managerial roles within the company and restricted them from participating in the securities market due to their alleged fraudulent activities. The 29-page order detailed how Gensol attempted to deceive SEBI, credit rating agencies, and investors by submitting counterfeit documents.

Misappropriation of Funds

Further probes have uncovered that loans intended for acquiring electric vehicles were misused. Instead, these funds were allegedly funneled into purchasing a luxury apartment in The Camellias, DLF Gurgaon, under the name of a company linked to the firm’s managing director and his brother. Additionally, diverted funds were reportedly spent on personal luxuries such as golf equipment, travel, and shopping sprees.

According to SEBI’s findings, the evidence suggests a clear pattern of misappropriation by the promoter directors, who treated the company’s resources as personal assets. The order states, “The promoters were managing a public company as if it were a private entity, using company funds for unrelated expenses, akin to a personal piggy bank.”

This ongoing investigation highlights the need for transparency and accountability within corporate governance as regulatory bodies tighten their grip on financial misconduct.