Context:
The Securities and Exchange Board of India (Sebi) has barred Anmol Singh Jaggi and Puneet Singh Jaggi, promoters of Gensol Engineering, from being directors in the company and from dealing in securities due to alleged fund diversion. Sebi has also placed a hold on the company’s stock split.
Investigation Findings
- Forensic Audit: Sebi has decided to appoint a forensic auditor to examine the books of accounts of Gensol Engineering and its related entities.
- Fraudulent Fund Diversion: Sebi’s interim order cites prima facie evidence of misutilization and diversion of funds in a fraudulent manner by the promoter directors, who are alleged to be the direct beneficiaries of the diverted funds.
Details of Alleged Fund Misuse
- Loan Mismanagement: Gensol Engineering availed â‚ą977.75 crore in term loans from IREDA and PFC, with â‚ą663.89 crore allocated for purchasing 6,400 electric vehicles. However, the company only procured 4,704 vehicles for â‚ą567.73 crore, leaving â‚ą262.13 crore unaccounted for.
- Funds Route: Sebi alleges that the remaining funds were either transferred back to the company or routed to entities directly or indirectly related to the promoters.
- Misuse of Funds: Some of the diverted funds were reportedly used for personal expenses of the promoters, including the purchase of high-end real estate, and for the benefit of private promoter entities and close relatives.
Misleading Disclosures to Investors:
- False Pre-Orders: Gensol Engineering made disclosures indicating that it had received pre-orders for 30,000 electric vehicles. However, Sebi claims the Memorandums of Understanding (MoUs) were mere expressions of willingness, lacking price or delivery details, suggesting that the company made misleading disclosures to investors.
- Lack of Manufacturing Activity: During a visit to the company’s Pune plant, Sebi observed minimal activity, with only 2-3 laborers present, raising further concerns about the company’s operations.
Sebi’s action reflects its ongoing commitment to ensuring transparency and compliance within the securities market. The ban on Gensol’s promoters and the forensic audit ordered are critical steps in investigating and addressing the alleged fraudulent activities and misleading practices that have impacted investors and the integrity of the market.
