In a major regulatory development, the National Company Law Tribunal (NCLT), Ahmedabad Bench, has found prima facie evidence of systemic fraud, illegal fund diversion, and share price manipulation at Gensol Engineering Limited and its associated entities.
Acting on an “urgent” petition with the “possibility of further dissipation of evidence or assets” filed by the Ministry of Corporate Affairs (MCA), the Tribunal on May 28 passed sweeping interim reliefs, including freezing bank and demat accounts, restraining trading of securities, and directing asset disclosures of Gensol Engineering and 16 other companies and their promoters.
The MCA moved the urgent petition in view of alleged serious breaches of corporate governance by Gensol’s promoters. The plea accused the company and its 16 related entities of misusing public funds, rerouting borrowings for unauthorised purposes, and manipulating financial statements to mislead shareholders, creditors, and regulators.
Interim Order
Considering the “emergent nature of the case, the substantial public interest involved, and the possibility of further dissipation of evidence or assets,” the Tribunal granted reliefs without requiring advance copies of the petition to be served on the respondents—marking a significant procedural departure.
Regulatory agencies, including the Bombay Stock Exchange (BSE), National Stock Exchange of India (NSE), Central Depository Services (India) Limited (CDSL), National Securities Depository Limited (NSDL), Central Board of Direct Taxes (CBDT), Reserve Bank of India (RBI), and the Indian Banks' Association have been directed to coordinate and enforce measures such as restraining securities trading, freezing demat accounts, disclosing asset details, and freezing bank accounts and lockers of the company and its promoters.
The NCLT also directed Gensol and 16 related companies to disclose all movable and immovable assets globally, including details of bank accounts.
Gensol Engineering and its related entities (the respondents) have been prohibited by the Tribunal from taking any action that could reduce or jeopardise the value of their assets, specifically mortgaging. They cannot sell, transfer, gift, or otherwise dispose of any assets they own, including securities, funds in bank accounts, or fixed deposits. This order prevents them from diluting their assets while investigations are ongoing, ensuring that assets remain available for recovery, accountability, or restitution if the fraud is proven.
The matter is scheduled to be heard next by the regular NCLT bench on June 3, 2025.
Allegations
According to the MCA’s petition, inspectors appointed under the Companies Act had unearthed red flags indicating fraudulent fund movements, asset misstatements, and financial manipulation designed to inflate share prices and mislead investors.
The Tribunal noted that “investigation reports and regulatory findings from the Ministry of Corporate Affairs, SEBI, and the Serious Fraud Investigation Office (SFIO) prima facie support the petitioner’s claims of systemic fraud involving substantial public interest.”
The MCA submitted that the alleged pattern of illegal conduct has caused irreparable harm to public shareholders, institutional creditors, and the integrity of India’s financial markets.
MCA Investigation
Gensol Engineering is under scrutiny as part of a broader MCA investigation into corporate governance violations, including the alleged misuse of corporate structures for siphoning funds. The company and its affiliates allegedly diverted funds raised for specific business purposes through fraudulent mechanisms and misstated their financial disclosures in regulatory filings.
Earlier this month, the MCA had ordered a probe into the affairs of crisis-hit Gensol Engineering and 16 other companies, including BluSmart Mobility, for alleged violations of the Companies Act. The Ministry is expected to complete its investigation into Gensol Engineering within three to five months, sources had earlier said on May 20.
The other related companies in the case include Blu-smart Charge, Blue-smart Fleet, Blu-smart Mobility Tech, Blu-smart Mobility, Blu-smart Premium Fleet, Gensol Electric Vehicles, Gensol EV Lease, Go Auto, Matric Gas and Renewables, Gensol Utilities, Gosolar Ventures, Gensol Consultants, Param Renewable Energy, Scorpius Trackers, Capbridge Venture and Wellary Solar Industries.
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