NCLT Orders Asset Freeze on Gensol Engineering Amid Financial Irregularity Allegations

The Ahmedabad bench of the National Company Law Tribunal (NCLT) has ordered stringent action against Gensol Engineering Ltd, its affiliated firms, and senior executives following serious allegations of financial inconsistencies and corporate governance violations, CNBC reported Wednesday.

The tribunal directed a freeze and attachment of all bank accounts and lockers belonging to Gensol Engineering and its connected entities.

The order was issued after the Ministry of Corporate Affairs (MCA) petitioned for urgent interim relief to enable the Reserve Bank of India (RBI) and the Indian Banks’ Association (IBA) to take swift action to protect the financial assets of Gensol and 37 associated parties and individuals.

Prima Facie Evidence

In its May 28 order, the tribunal cited prima facie evidence indicating that Gensol Engineering engaged in systemic discrepancies.

“… This tribunal notes serious allegations of inconsistent conduct, including diversion of company funds by the promoters of Gensol Engineering Limited and related entities, violation of corporate governance norms, manipulation of financial statements, default in loan repayments despite false declarations, and illegal alienation of company assets. The investigation reports and regulatory findings from the Ministry of Corporate Affairs, SEBI, and SFIO prima facie support the petitioner’s claims of systemic inconsistencies involving substantial public interest,” the order stated.

Given the gravity of the situation, multiple agencies including the MCA, SEBI, SFIO, RBI, and the Income Tax Department are actively participating in the ongoing investigation.

The NCLT bench, comprising Judicial Member Mohan Prasad Tiwari and Technical Member Reena Sinha Puri, also directed that notifications be sent to all respondents with a copy of the plea. The matter is slated for its next hearing on June 3.

Legal Trouble for Subsidiary Param Renewable Energy

Adding to Gensol’s mounting troubles, its subsidiary Param Renewable Energy is facing separate legal action in the Delhi High Court.

According to a Livemint report, SMAS Auto Leasing India Private Ltd., an electric vehicle (EV) leasing company, has filed a petition seeking the appointment of a court-appointed receiver to take custody of electric vehicles leased to Param.

The petition raised concerns over the deteriorating value of idle EV assets, citing risks of battery degradation due to inactivity, extreme heat exposure, and lack of routine maintenance.

For context, in 2022, SMAS Auto Leasing India and Param Renewable Energy signed a master leasing agreement under which 62 electric vehicles were leased to Param. However, the Gensol subsidiary allegedly defaulted on several lease payments despite receiving regular invoices.