The Ministry of Corporate Affairs (MCA) has launched a suo motu inquiry into Gensol Electric, deepening the regulatory spotlight on the company after the Securities and Exchange Board of India (Sebi) issued a scathing interim order against its promoters. This development marks a serious escalation in the unfolding financial scandal, which now threatens to significantly tarnish the reputation of the fast-growing renewable energy and electric vehicle (EV) firm.
According to sources cited by Business Today TV, the MCA is currently scrutinising Gensol’s regulatory filings, financial statements, loan usage, and corporate governance mechanisms. The ministry’s inquiry is reportedly independent of Sebi’s and is aimed at uncovering potential violations of the Companies Act, as well as evaluating whether systemic fraud or mismanagement has occurred at the board and management level.
Background of Allegations
Sebi had earlier taken a strong stance against Gensol Electric's promoters, Anmol Singh Jaggi and Puneet Singh Jaggi, by barring them from participating in the securities market and from holding any director or key managerial positions in listed entities. This came after complaints surfaced regarding alleged manipulation of Gensol’s share price, misuse of institutional loans, and deliberate misinformation submitted to financial agencies.
In its interim order, Sebi accused the promoters of running Gensol Electric like a privately owned family enterprise, with little regard for the responsibilities and transparency required of a publicly listed company. The regulator highlighted how public shareholders were kept in the dark, while the promoters allegedly siphoned off large sums of money for personal enrichment.
Specific Findings by Sebi
-
Loan Misuse: Gensol Electric secured loans worth Rs 975 crore from public sector institutions including the Indian Renewable Energy Development Agency (IREDA) and the Power Finance Corporation (PFC). These funds were meant for the expansion of its EV fleet, but Sebi found that only a small fraction was used for that purpose.
-
Fund Diversion: Over Rs 200 crore was funneled through a car dealership, eventually landing in companies and accounts linked to the Jaggi family. This raised serious red flags over potential benami transactions and conflict of interest.
-
Luxury Spending: Part of the diverted funds were allegedly used to acquire luxury real estate properties and make other high-end personal purchases, with little to no benefit to the company or its shareholders.
-
Fake Documentation: The promoters allegedly submitted fabricated records to credit rating agencies in an attempt to mask delays in loan repayment and project a false picture of financial health and operational efficiency.
-
Breach of Loan Covenants: Even ring-fenced loans, meant for specific use, were redirected arbitrarily, signaling a potential breach of loan agreements with lenders and indicating a complete breakdown in financial discipline.
Red Flags and Shareholder Concerns
Sebi’s investigation also flagged a sharp drop in promoter shareholding, from 70.72% in FY2020 to just 35% in FY2025, as a potential indicator of the promoters distancing themselves from the company or exiting their commitments quietly amid growing irregularities. This shift, combined with the misuse of funds, undermines long-term investor trust and raises concerns over the integrity of the company's leadership.
MCA’s Role and Future Actions
The MCA is now expected to examine whether these alleged acts fall under the purview of fraudulent conduct, misstatement of financials, or related-party transaction violations under the Companies Act, 2013. The ministry may also consider recommending criminal proceedings, depending on the outcome of its investigation. While there is no official timeline for the inquiry’s conclusion, the implications could be far-reaching—not only for Gensol Electric and its parent company, Gensol Engineering, but also for investor confidence in the broader renewable energy and EV sectors.
A Tale of Growth and Governance Disconnect
What makes the case more compelling is the stark contrast between Gensol’s strong financial performance and its alleged internal failures. The company’s revenue jumped from Rs 61 crore in FY2017 to Rs 1,152 crore in FY2024, with net profit rising from Rs 2 crore to Rs 80 crore in the same period. However, the impressive top-line growth has now been overshadowed by the allegations of corporate misconduct, ethical lapses, and regulatory non-compliance.
Broader Impact
This scandal may have reputational consequences for the entire EV and green energy ecosystem in India, especially at a time when the sector is receiving massive public and private investments. It could also prompt regulators and lenders to adopt more stringent oversight and due diligence frameworks for similar startups or listed entities in the future.
As investigations continue, shareholders, regulators, lenders, and industry stakeholders will be closely watching how this case unfolds—and whether accountability is enforced in a manner that sets a precedent for corporate governance in India.
