Capital market regulator Sebi’s findings of large-scale financial irregularities at Gensol Engineering has raised the likelihood of a multi-agency probe into the clean energy firm, as sources with the regulator have confirmed to Moneycontrol that the probe is set to intensify - possibly attracting investigation by other agencies – and may include examination of all connected entities, listed and unlisted, as well as connected persons.
In a sweeping interim order issued on April 15, Sebi had accused the company of diverting funds, misusing loans, and financing trades in own stock through related parties.
According to Sebi, funds worth Rs 96.69 crore were siphoned off to promoter-linked entities, while Rs 37.5 crore worth of loan from a subsidiary landed in the account of promoter Anmol Singh Jaggi. An additional Rs 262 crore remains unaccounted for in the company’s electric vehicle purchase unit. All this has resulted in Sebi barring the promoter brothers from holding board positions, and a forensic audit of Gensol and its affiliates has been ordered.
Legal experts say the allegations, if finally proven, could trigger parallel investigations under corporate fraud, money laundering, and criminal breach of trust laws.
“This goes beyond a regulatory censure—it may pave the way for a criminal probe,” said Akshat Khetan of AU Corporate Advisory. The case could draw attention from agencies including the CBI, Enforcement Directorate, and Ministry of Corporate Affairs. Sebi and Gensol Engineering did not reply to Moneycontrol’s queries, and the story shall be updated once they respond.
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Misuse of Public Funds
“When funds borrowed from public sector undertakings like IREDA and PFC are allegedly diverted through complex and layered transactions for personal enrichment, it points to violations of multiple laws. This case not only reflects corporate fraud under the Companies Act, but may also warrant a criminal breach of trust investigation by the CBI, and money laundering probes under the PMLA by the Enforcement Directorate,” Akshat Khetan said.
Based on the fund trail and account balances, Sebi observed that Rs 96.69 crore was diverted to promoter and promoter-linked entities, bypassing the stated end-use of the loan sanctioned ny PFC. Sebi also found that Rs 37.5 crore out of a Rs 171.30 crore loan taken by Gensol EV Lease Pvt Ltd (a subsidiary of GEL) from IREDA was transferred to Anmol Singh Jaggi. The capital market regulator’s order stated that it will further examine the alleged transfer of Rs 37.50 crore to Jaggi. If found to be true, this could be a serious matter, legal experts said.
Additionally, Gensol's transfer of Rs 775 crore to Go-Auto (a supplier of EVs), against which it received 4,704 EVs - costing Rs 567.73 crore - may also warrant a probe. A corporate law expert said, “Allegations of fund diversion, purchase of own company shares through diverted funds, misuse of loan amounts, and related-party transactions may invite a probe by the Ministry of Corporate Affairs or the Serious Fraud Investigation Office (SFIO), which is the investigation wing of the Ministry of Corporate Affairs.”
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Pump and Dump Allegation
Sebi has prima facie observed that Gensol and its promoters/promoter-related entities funded an alleged related-party entity called Wellray for trading in Gensol’s scrip - an act that violates Section 67 of the Companies Act. This section restricts companies from buying their own shares or providing financial assistance for subscribing their own issues, unless a reduction of share capital is approved. It exists to prevent companies from artificially inflating the price of their own stock.
Sebi, in its order, also observed that “Gensol had provided funds, through layered transactions, to Gensol Ventures Private Limited (a promoter of Gensol) for subscribing to 97,445 equity shares of Gensol.”
Another issue that regulators may examine is whether the required 20% additional margin for the purchase of EVs was adhered to. According to Sebi’s calculations, Gensol Engineering received loans totaling Rs 663.89 crore from IREDA and PFC for EV purchases. As per norms, Gensol was required to contribute 20% from its own funds, bringing the total expected deployment to Rs 829.86 crore for the purchase of 6,400 EVs. Sebi’s interim order said that Rs 262.13 crore (Rs 829.86 crore – Rs 567.73 crore, the cost of EVs it took delivery of) remains unaccounted for.
Diversion of Money
Sebi further alleged that funds from Gensol were transferred to suspected related-party entity Wellray, and then used for personal expenses of the promoter family - including the alleged purchase of Rs 50 lakh worth of shares in a company owned by a celebrity fintech founder, Rs 26 lakh for a golf kit, Rs 17.28 lakh for jewellery or accessories, payments towards real estate, and the clearing of credit card dues. To uncover the truth, Sebi has ordered a forensic audit of the company’s affairs.
In the past, Sebi orders have led to investigations by the Enforcement Directorate and the Ministry of Corporate Affairs. The financial accounting regulator, National Financial Reporting Authority (NFRA) too has initiated action against auditors of companies, if lapses are found.
Too Soon or Too Late?
Some legal experts, however, believe Sebi should not make sudden and harsh moves against company founders, as it could harm minority shareholders. Anil Choudhary, Partner at Finsec Law Advisors said, “I don’t think one should draw too many conclusions from an ex-parte order. The investigation is still pending and only a prima facie case has been made out. The regulator may have found something concerning, but one should not jump to conclusions without hearing the other side of the story.”
In its interim order, Sebi had directed the removal of promoter brothers Anmol Singh Jaggi and Puneet Singh Jaggi from holding the post of director or any key managerial position in the company. GEL and the Jaggi brothers have also been barred from accessing the capital markets. Sebi further ordered the appointment of a forensic auditor to examine the books of accounts of GEL and its related parties. The regulator also directed GEL to put its proposed 1:10 stock split on hold.
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