Uncover how weak governance led to one of 2025’s biggest corporate collapses
In April 2025, Gensol Engineering Ltd., a prominent player in India’s renewable energy and electric vehicle (EV) sectors, became embroiled in a significant financial scandal. Investigations revealed that the company’s promoters, Anmol Singh Jaggi and Puneet Singh Jaggi, allegedly diverted substantial loan funds intended for EV procurement to finance personal luxury expenditures. This misuse of funds has raised serious concerns about corporate governance, regulatory oversight, and the effectiveness of financial auditing in India.
The Unfolding of the Scandal
Gensol Engineering secured loans totaling approximately ₹977.75 crore from state-run institutions, including the Indian Renewable Energy Development Agency (IREDA) and Power Finance Corporation (PFC), to finance the acquisition of 6,400 electric vehicles for its ride-hailing subsidiary, BluSmart Mobility. However, investigations revealed that only 4,704 vehicles were procured, valued at ₹567.73 crore, leaving a discrepancy of over ₹400 crore. Further scrutiny uncovered that funds were allegedly diverted to purchase a luxury apartment in Gurgaon’s DLF Camellias, expensive golf equipment, and to settle personal credit card bills.
Regulatory and Legal Actions
The Securities and Exchange Board of India (SEBI) responded by barring the Jaggi brothers from holding executive positions in any listed company and from participating in the securities market. SEBI’s interim order highlighted that the promoters treated the publicly listed company as their personal entity, misusing corporate funds for unrelated personal expenses. Additionally, SEBI halted Gensol’s proposed 1:10 stock split, citing concerns over the company’s financial practices.
The Enforcement Directorate (ED) initiated a probe under the Prevention of Money Laundering Act (PMLA), focusing on the alleged diversion of funds and potential links to the Mahadev betting app scandal. The ED froze over 500,000 shares of Gensol Engineering, suspecting stock price manipulation using illicit funds routed through foreign portfolio investors.
Impact on Stakeholders
The scandal had immediate repercussions for Gensol Engineering and its stakeholders. The company’s stock price plummeted by approximately 90% from its peak in June 2024, eroding investor wealth and confidence. Independent directors, including Harsh Singh and Kuljit Singh Popli, resigned from the board, citing governance issues and lack of transparency.
BluSmart Mobility, Gensol’s EV ride-hailing subsidiary, suspended operations amid the controversy. The suspension disrupted services in key markets like Delhi-NCR and Bengaluru, affecting both drivers and customers. Investors and venture capitalists began reassessing investment terms, demanding stricter governance clauses and enhanced due diligence processes to mitigate future risks. ]
Broader Implications for Corporate Governance
The Gensol scandal underscores systemic issues in corporate governance and regulatory oversight in India. Auditors failed to detect the misuse of funds, raising questions about the effectiveness of internal controls and the independence of audit processes. The National Financial Reporting Authority (NFRA) highlighted deficiencies in auditing practices, including inadequate scrutiny of related-party transactions and compromised auditor independence.
The case also exposed gaps in regulatory oversight, with SEBI facing criticism for its delayed response and lack of action against associated financial institutions. Calls have been made for SEBI to investigate the due diligence failures of mutual funds and bankers involved with Gensol, emphasizing the need for comprehensive regulatory reforms.
The Gensol Engineering scandal serves as a stark reminder of the consequences of weak corporate governance and regulatory oversight. The misuse of substantial loan funds for personal expenses not only undermined investor confidence but also highlighted systemic vulnerabilities in India’s financial and regulatory frameworks. Addressing these issues requires concerted efforts from regulatory bodies, financial institutions, and corporate entities to strengthen governance practices, enhance transparency, and restore trust in the financial system.
