[Analysis] SEBI and ICAI Probe Gensol – Fund Diversion | Forgery | Corporate Governance Lapses

Gensol Engineering, once a rising star in India's EV and clean energy sector, is now at the centre of a major regulatory probe. SEBI's interim order has exposed ₹977 crore in fund diversion, forged documents, stock manipulation, and misleading disclosures. With ICAI launching an audit review into potential auditor failures, this case is a critical reminder of the importance of corporate governance, transparency, and accountability in emerging industries.

Table of Contents

1. Introduction – From EV Hype to Financial Red Flags
2. SEBI’s Interim Order – What Triggered the Probe
3. What SEBI Found – Detailed Revelations
4. ICAI’s Audit Review – What It Will Examine
5. SEBI’s Interim Actions – Immediate Safeguards
6. Broader Impact – A Wake-Up Call for Corporate Governance
7. Conclusion – A Defining Moment for India’s Regulatory Backbone

1. Introduction – From EV Hype to Financial Red Flags

Gensol Engineering Limited (hereinafter referred to as “the company”), a listed solar and electric mobility sector firm, is facing serious scrutiny from Indian regulators. Once praised for its rapid growth and innovative ventures in clean energy and electric vehicle (EV) leasing, the company is now at the centre of a controversy involving financial mismanagement, misleading disclosures, and personal enrichment at the expense of public funds.

On April 15, 2025, the Securities and Exchange Board of India (SEBI) issued an interim order highlighting grave company operations irregularities. In response, the Institute of Chartered Accountants of India (ICAI) has initiated a financial audit review through its Financial Reporting Review Board (FRRB) to examine the company’s books and the role of its auditors for the fiscal year 2023–24.

2. SEBI’s Interim Order – What Triggered the Probe

SEBI’s order points to large-scale fund diversion, forgery of financial documents, improper related-party transactions, and misleading public statements. The company and its promoters allegedly used complex financial arrangements to reroute company funds for personal gain and misrepresented the company’s financial condition to investors and rating agencies.

The 29-page interim order was issued under Sections 11(1), 11(4), and 11B of the SEBI Act, 1992, and is currently under enforcement while a deeper investigation continues.

3. What SEBI Found – Detailed Revelations

SEBI’s interim order points to serious financial misconduct by the company and its promoters. These include fund diversion, forgery, and weak corporate governance.
The major findings are listed below:

3.1 Diversion of Loan Funds

The company received ₹977.75 crore in loans from government agencies IREDA and PFC, with ₹663.89 crore specifically allocated for buying 6,400 electric vehicles (EVs). However, the company only purchased 4,704 EVs worth ₹567.73 crore.

The differential amount was not accounted for properly. SEBI discovered that this money was transferred to Go-Auto, a supplier of EV, which then routed it to promoter-linked firms like Capbridge Ventures LLP, Matrix Gas and Renewable Ltd., and Wellray Solar Industries Pvt. Ltd., raising concerns of intentional fund diversion.

3.2 Forged Credit Documents

To avoid credit downgrades, the company allegedly submitted forged Conduct Letters and No Objection Certificates (NOCs) to rating agencies like ICRA and CARE, falsely claiming timely debt repayment.

Upon verification, both IREDA and PFC denied issuing these documents. SEBI flagged this as a serious act of forgery and misinformation, used to mislead lenders, investors, and credit rating bodies.

3.3 Money Used for Promoter Gains

SEBI traced how these loan funds moved through Go-Auto and ended up benefiting the company’s promoters:

• A significant portion of funds was transferred to Capbridge Ventures LLP, where promoters Anmol and Puneet Singh Jaggi are partners.
• Capbridge used part of these funds to buy a high-end apartment at DLF’s Camellias project in Gurgaon.
• Some funds were routed through the promoters’ mother, and were later redirected to other related companies.

This shows a clear pattern of misusing corporate loans for personal enrichment through the related party involvement.

3.4 Stock Price Manipulation

SEBI revealed that Wellray Solar, a company closely linked to the promoters, used funds from the company and its affiliates to trade in the company’s own shares.

Between 2022 and 2024, ₹338 crore (160 crore as buy value and 178 crore as sell value) worth of the company shares were bought and sold by Wellray. Over ₹100 crore of this trading capital came directly from the company and related entities. This activity may violate Section 67 of the Companies Act, 2013, which prohibits companies from funding the purchase of their own stock.

3.5 Misleading Public Disclosures

The company made multiple inaccurate or exaggerated announcements:

• It claimed pre-orders for 30,000 EVs, which turned out to be mere MoUs with no firm commitment.
• A deal to transfer 2,997 EVs to Refex Mobility was announced and later withdrawn.
• It claimed a ₹350 crore valuation for its newly formed U.S. subsidiary, Scorpius Trackers Inc., without any explanation or valuation basis.

SEBI stated these were designed to mislead investors and inflate the company’s perceived value.

3.6 No Real Manufacturing Activity

To validate its EV ambitions, the company showcased a factory in Pune. However, when NSE officials visited the facility, they found that only 2–3 workers were on site and no production activity was in progress. There was very low electricity usage, only ₹1.57 lakh billed in the peak month, suggesting no real manufacturing was happening.

This directly contradicted the company’s public claims of large-scale EV production and expansion.

4. ICAI’s Audit Review – What It Will Examine

In light of SEBI’s findings, ICAI has launched a probe through its FRRB. The focus areas include:

• Whether The company’s statutory auditors failed to detect or report these serious issues.
• If the financial statements for FY 2023–24 presented a true and fair view.
• Whether the related-party transactions were properly disclosed.
• Possible violations of auditing and ethical standards set by ICAI.

If discrepancies are confirmed, ICAI may escalate the case to its Disciplinary Committee, which can impose penalties, suspensions, or cancel audit licenses.

5. SEBI’s Interim Actions – Immediate Safeguards

To protect investor interests and ensure market integrity, SEBI has issued several key directives:

• The promoters of the company have been barred from acting as directors or KMPs at the company or any listed company.
• All three noticees (the company and its promoters) are prohibited from trading in the securities market.
• SEBI has halted the company’s planned stock split, which could have attracted new investors under misleading circumstances.
• A forensic auditor appointed as per the order shall further investigate the financial dealings of the company and its related companies​ and submit a report to SEBI within six months.

6. Broader Impact – A Wake-Up Call for Corporate Governance

This case has far-reaching implications. It exposes how companies, especially those led by dominant promoter groups, can potentially bypass internal controls and transparency norms. It highlights the need for stricter audit standards, robust disclosures, and tighter enforcement of related-party rules.

With ICAI and SEBI taking strong action, this could become a landmark case in reforming corporate governance and boosting investor trust in the Indian capital markets.

7. Conclusion – A Defining Moment for India’s Regulatory Backbone

The exposure of The company’s operations is not merely a corporate scandal, it is a watershed moment for India’s regulatory and financial auditing systems. At a time when investor appetite for clean energy and electric mobility is surging, this case underscores the urgent need for stronger corporate governance frameworks, independent oversight, and credible auditing practices.

Whether SEBI and ICAI can bring about accountability and institutional reforms will determine the confidence of global and domestic investors in India’s capital markets. The outcome of this case may very well shape how emerging sectors like electric mobility are regulated, scrutinised, and trusted going forward. As the nation marches towards a sustainable future, trust and transparency must form the bedrock of every clean-tech promise.

Source – Economic Times

Click Here to Refer to SEBI’s Interim Order