Gensol Engineering, promoters barred from securities market in fund diversion case, check details

The Securities and Exchange Board of India (SEBI) on Tuesday, April 15, barred Gensol Engineering Ltd (GEL) and two of its promoters, Anmol Singh Jaggi and Puneet Singh Jaggi, from the securities markets till further orders in a fund diversion and governance lapses case.

The securities market regulator also prohibited the two from holding a directorial or key management personnel position in the engineering firm until further notice.

SEBI has also ordered Gensol Engineering to put a hold on the 10:1 stock split its board had approved on Saturday, April 12.

In June 2024, the market watchdog received a complaint related to the manipulation of share price and diversion of funds from GEL and thereafter started examining the matter.

In a 29-page interim order, SEBI said, "The prima facie findings have shown mis-utilisation and diversion of funds of the company (GEL) in a fraudulent manner by its promoter directors, Anmol Singh Jaggi and Puneet Singh Jaggi, who are also the direct beneficiaries of the diverted funds".

SEBI said that Gensol attempted to mislead SEBI, the CRAs (credit rating agencies), the lenders and the investors by submitting forged conduct letters purportedly issued by its lenders.

The noticees 1, 2 and 3 (GEL, Anmol and Puneet Singh Jaggi) are alleged to have violated the provisions of PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) rules, the order stated.

SEBI noted that the promoters were running a listed public company as if it were a “propriety firm”. GEL's funds were routed to related parties and used for unconnected expenses as if the company's funds were promoters' “piggy banks”.

The result of these re-routed transactions would mean that these diversions would need to be written off from Gensol’s books at some point, which would ultimately lead to losses for the investors of the company.

"...prima facie evidence of a blatant violation of rules of corporate governance is writ large over the workings of the company. The diversion of funds of the company (GEL) by promoter entities reflects a culture of weak internal control, where even ring-fenced borrowings from institutional creditors were rerouted at the total discretion of the promoters," SEBI's whole-time member Ashwani Bhatia said in the order.

The internal controls at Gensol appear to be loose and through the quick layering of transactions, funds have seamlessly flowed to multiple related entities/individuals, Bhatia said.

It also directed the firm to appoint a forensic auditor to examine the books of accounts of Gensol and its related parties.