Gensol Promoters Accused of Fund Diversion for Personal Gain

The swift action taken by the Securities and Exchange Board of India (SEBI) against Gensol Engineering Ltd has led to a ban on the company and its promoter directors from engaging in the securities market. The ruling affects Anmol Singh Jaggi and Puneet Singh Jaggi, who headed the firm until very recently. SEBI's order follows a formal complaint filed in June 2024 that accused Gensol, its promoters, and some other unidentified persons of potential share price manipulation and misuse of shareholders' funds.

SEBI's interim order has pointed out some very serious governance issues. It has alleged that huge sums of corporate money were diverted for personal gain by the very people who were supposed to be looking out for shareholders. The order has also called for an immediate stop to a proposed stock split. The situation with the company looks pretty bad from a transparency and accountability point of view.

Luxury Homes and Startups: A Trail of Misused Capital

The investigation centers on a loan of INR 93.88 crore secured by Gensol from the Indian Renewable Energy Development Agency (IREDA). The loan, which was supposed to be used to expand electric vehicle operations, was mostly transferred to Go-Auto Pvt Ltd and then funneled to CapBridge Ventures LLP — a company that Anmol Singh Jaggi has a strong influence over. Out of the INR 93.88 crore that was part of the scheme, INR 42.94 crore was used to buy a posh apartment in DLF Camellias, Gurugram.

Additionally, from the same funds, an investment of INR 50 lakh was made in Third Unicorn, a startup launched by Ashneer Grover. The funds were also used for personal expenses, including travel abroad. SEBI's findings portray Grover as following a pattern of financial self-interest that put him on the fast track to personal wealth while placing company obligations in jeopardy.

Personal Expenses Funded by Company Loans

The regulator's examination of bank records reveals worrisome activities connected to Puneet Singh Jaggi. They show that around INR 13.55 crore from Wellray, another related company, was used to make transfers that profited Jaggi's family and friends. Among the outflows were these dubious purchases:

 - Foreign currency, INR 66.36 lakh

 - Payments to American Express, INR 49 lakh

 - Other personal expenditures, more than INR 18 lakh

In sum, the transfers favored Jaggi and his close associates. SEBI claims that these transactions were neither disclosed nor aligned with the firm’s financial objectives. They are systematic misuse of corporate resources.

Gensol has drawn the ire of the regulator for what it considers a total breakdown of internal controls. Internal emails and conduct letters allegedly were fabricated to mislead stakeholders, including investors, banks, and rating agencies. Gensol supposedly directed its employees to write these misleading documents. And Gensol's Board of Directors allegedly knew all about it. If the story holds up, SEBI believes it'll force Gensol to write off those diverted funds, hitting its balance sheet and making life tougher for its employees.