Power Finance Corporation (PFC) is likely to initiate proceedings against Gensol Engineering Ltd before the Debt Recovery Tribunal (DRT) to recover its dues, even as Indian Renewable Energy Development Agency (IREDA) has already dragged the troubled company to the National Company Law Tribunal (NCLT), a senior government official said.
PFC, which sanctioned Rs 633 crore to Gensol in January 2023, is exploring recovery through the DRT route instead of joining the ongoing corporate insolvency process. DRT proceedings allow direct enforcement of secured assets and bypass the corporate resolution route under the Insolvency and Bankruptcy Code (IBC). However, the DRT route does not offer the moratorium benefits provided by NCLT proceedings.
“IREDA has gone to NCLT. PFC is likely to approach DRT. IREDA is a secured creditor. So it has to go wherever it wants to go. As far as PFC is concerned, they are also independent creditors,” the official said.
Gensol had borrowed Rs 977.75 crore from IREDA and PFC between FY22 and FY24, of which Rs 663.89 crore was specifically earmarked for the purchase of 6,400 electric vehicles (EVs) to be leased to BluSmart. However, the company has admitted to acquiring only 4,704 EVs valued at Rs 567.73 crore. After accounting for Gensol’s mandated 20 percent equity contribution, the expected deployment should have been Rs 829.86 crore, leaving an unaccounted gap of Rs 262.13 crore.
MCA investigation
Meanwhile, the Ministry of Corporate Affairs (MCA) has launched a probe into the group.
“MCA has done the first level of diligence, which is the inquiry. MCA has ordered an investigation. The first preliminary report has come. MCA will aim to finish the investigation in the next three to five months and do whatever has to be done,” the official added.
The official noted that the investigation, which spans the Gensol group, including BluSmart and 18 associated entities, is being expedited. “Investigation normally takes a lot of time. But here we are targeting... when things are hot and we are able to find everything. The target internally is to finish our investigation within three to five months,” the person said, adding that a referral to the Serious Fraud Investigation Office (SFIO) may be avoided if enough evidence surfaces early.
Meanwhile, IREDA has claimed Rs 510 crore in defaults and potential defaults across five loan facilities sanctioned to Gensol. The lender filed a petition before the NCLT, Ahmedabad, and the company has been asked to file its reply by the next hearing on June 3. Prior to approaching the tribunal, IREDA issued recall and demand notices on May 4, followed by invoking the promoters’ personal guarantees on May 13.
SEBI action
The Securities and Exchange Board of India (SEBI) had flagged grave governance lapses in Gensol, highlighting minimal activity at its Pune-based EV manufacturing facility and diversion of funds to related entities. Following its investigation, the market regulator issued an order on April 15 barring Gensol promoters – Managing Director Anmol Singh Jaggi and Whole-time Director Puneet Singh Jaggi – from holding any key managerial roles or accessing the securities market until further notice.
The Jaggi brothers resigned from Gensol’s board on May 12. The Securities Appellate Tribunal (SAT) refused to grant any relief last week after Gensol challenged SEBI’s directions.
The SEBI probe revealed that funds meant for EV purchases were routed back to Gensol or to entities linked to the promoters. Some of these funds were allegedly used for personal expenses, including the purchase of a luxury apartment, transfers to relatives, and investments in promoter-owned firms.
Parallelly, the Institute of Chartered Accountants of India is conducting a review of the financial statements of Gensol Engineering and BluSmart Mobility for FY24 through its Financial Reporting Review Board. The review is expected to be completed in the next six months.
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