I. BACKGROUND OF THE COMPANIES AND THEIR INTERLINKAGE

Gensol Engineering Limited (GEL) is an Ahmedabad-based company originally engaged in solar consulting and renewable energy EPC (Engineering, Procurement and Construction) services. Over time, it expanded its operations to include electric vehicle (EV) leasing—a move that aligned with India’s growing focus on green mobility. The company showed significant financial growth as per the information available on Screener.in., with revenue increasing from ₹61 crore in 2017 to ₹1,297 crore in 2024[1]. It was first listed on the BSE SME platform in 2019 and later migrated to the main board of BSE[2] and NSE in July 2023. Its market capitalization peaked at ₹4,300 crore, and it had over one lakh public shareholders by 2025, while promoter holding reduced to just around 35%.

BluSmart Mobility, on the other hand, was launched as India’s first all-electric ride-hailing service, operational in cities like Delhi, Mumbai, and Bengaluru. It aimed to revolutionize the cab industry by offering eco-friendly and fully electric transportation options. Crucially, BluSmart was co-founded by Anmol Singh Jaggi and Puneet Singh Jaggi, who were also the promoters and directors of Gensol.[3] This dual control allowed a financial and operational partnership between the two entities: Gensol took loans to procure EVs, and BluSmart used them to operate its cab services. At first, this appeared to be an innovative synergy, but the lack of transparency in financial transactions and related-party dealings laid the groundwork for what would later unfold as a massive scam.

II. ORIGIN AND UNFOLDING THE SCAM

The scam began to unravel when SEBI received a formal complaint in June 2024 from an investor group alleging stock price manipulation and fund diversion in Gensol Engineering. Shortly after, in March 2025, credit rating agencies ICRA and CARE Ratings downgraded Gensol’s creditworthiness to a ‘D’ rating, citing delays in repayment of term loans and undisclosed defaults. This raised immediate red flags. Upon initiating a preliminary investigation, SEBI uncovered that Gensol had secured ₹977.75 crore in loans from IREDA (Indian Renewable Energy Development Agency Limited) and PFC (Power Finance Corporation Ltd.) both of which are trusted arms of the Indian government, responsible for green and infrastructure funding to buy 6,400 electric vehicles, but had only procured 4,704 EVs. The remaining funds—over ₹262 crore—were routed through a network of shell and related-party companies. Misuse of their loans is not just a corporate fraud, but a betrayal of public trust.

According to SEBI’s Interim Order dated April 15, 2025[4] , the diverted funds were used by the Jaggi brothers for personal luxury purchases, including a ₹42.94 crore apartment in DLF Camellias, Gurugram, and a ₹26 lakh luxury golf set (purchased using funds funneled through Capbridge Ventures LLP and Gensol Ventures Ltd). Transactions were routed via a dealer entity, Go-Auto, and further into connected parties such as Wellray Solar, which was later found to have traded over ₹160 crore in Gensol shares—artificially inflating its market price. Additionally, forged no-default certificates from IREDA and PFC were submitted to credit rating agencies to prevent rating downgrades. SEBI concluded that the promoters had used Gensol like a “personal piggybank”, violating provisions under the SEBI Act, 1992, PFUTP Regulations, 2003, and SEBI LODR Regulations, 2015.

As a result, SEBI barred the Jaggi brothers from participating in the securities market and holding directorial roles, ordered a forensic audit, and effectively froze any further equity actions. The fallout also forced BluSmart to halt operations across all cities due to lack of funding and collapse of investor confidence. Additionally, the SEBI investigation has triggered a sweeping regulatory response, with three key agencies now pursuing parallel probes into the Gensol-BluSmart scandal.

The Ministry of Corporate Affairs (MCA) has invoked its powers under Section 210 of the Companies Act, 2013 to examine potential violations including fraudulent financial reporting and undisclosed related-party transactions. Simultaneously, the Enforcement Directorate (ED) has launched a money laundering investigation under PMLA, focusing on the alleged ₹262 crore diversion through shell companies. Adding another layer of scrutiny, the Institute of Chartered Accountants of India (ICAI) has initiated a six-month forensic audit to assess potential audit failures in financial reporting. This unprecedented multi-agency action underscores how the case has escalated from securities law violations to allegations of systemic corporate fraud, financial malfeasance, and professional misconduct.

III. KEY ISSUES OF THE SCAM – MODUS OPERANDI

A. Diversion and Misutilization of Funds – Gensol Engineering Limited secured ₹977.75 crore in loans from government institutions IREDA and PFC to purchase 6,400 electric vehicles (EVs). However, only 4,704 EVs (worth ₹567.73 crore) were actually acquired, leaving ₹262 crore unaccounted for. SEBI's investigation revealed this missing amount was systematically diverted through a network of shell companies and related-party transactions. The scam operated through layered financial maneuvers:

1. Layered Transactions via Go-Auto: Loan funds were transferred to Go-Auto, Gensol’s designated EV supplier. Instead of procuring vehicles, Go-Auto redirected money to entities controlled by Gensol’s promoters—Capbridge Ventures LLP, Wellray Solar, and Matrix Gas & Renewables.

2. Circular Money Flow: Investigation uncovered round-tripping, where identical sums (e.g., ₹8.5 crore) cycled between Gensol, Go-Auto, and Wellray to simulate legitimate transactions. This disguised the siphoning of funds.

3. Misused Loan Purpose: Funds earmarked for EVs were repurposed for personal luxuries (e.g., real estate, golf sets), promoter-linked entities, and stock market bets.

B. Personal enrichment :The investigation revealed that promoters Anmol and Puneet Jaggi systematically used Gensol's funds as their personal treasury, blatantly violating corporate governance norms. This wasn't just poor judgment - it was a calculated misuse of public company resources for private gain. The most egregious example was the ₹42.94 crore luxury apartment in Gurugram's premium DLF Camellias project. SEBI's investigation traced the money trail (as documented on pages 12-13 of the Interim Order):

1. Gensol first transferred loan funds meant for EV purchases to its vendor Go-Auto

2. Go-Auto then routed ₹50 crore to Capbridge Ventures (a Jaggi-family controlled entity)

3. Capbridge used ₹42.94 crore to purchase the apartment, initially booked in the name of Anmol's mother before being transferred to their family firm.

Equally telling was the ₹26 lakh TaylorMade golf set purchase. SEBI's order (page 23) specifically notes that Wellray Solar - the entity that made this purchase - had no legitimate business need for golf equipment. The money trail showed this was clearly a personal expense disguised as a business cost. The findings are backed by concrete evidence documented in SEBI's order, which meticulously traces specific bank transactions complete with dates and amounts.

C. Stock manipulation: artificially inflating share prices The investigation uncovered a deliberate scheme by Gensol's promoters to manipulate the company's stock price through connected entities, primarily Wellray Solar. SEBI's analysis revealed that Wellray executed trades worth ₹160 crore in Gensol shares—accounting for a staggering 99% of its total trading activity—using funds channeled from Gensol and its related parties. This orchestrated buying created artificial demand in the market, driving up the share price to unsustainable levels (peaking at ₹1,126 per share) before the inevitable collapse. The manipulation followed a classic "pump-and-dump" pattern:

1. Artificial Inflation: Wellray's heavy buying, financed by Gensol-linked entities, generated false market excitement about the stock.

2. Retail Investor Trap: Unaware of the manipulation, small investors poured money into what appeared to be a high-growth stock, only to suffer significant losses when the scheme unraveled and the price crashed to ₹133.

D. Forged Documents: Systematic Deception of Stakeholders The investigation uncovered a disturbing pattern of document forgery by Gensol's management to conceal its deteriorating financial position. In multiple instances between December 2024 and March 2025, the company submitted fabricated certificates to credit rating agencies ICRA and CARE to maintain its creditworthiness. These included:

1. Fictitious No Default Certificates: Gensol provided letters claiming all loan repayments to IREDA and PFC were current. However, SEBI's verification with the lenders revealed 12 separate payment defaults totalling ₹48.22 crore in principal and interest payments that were either delayed or unpaid (as detailed on pages 8-9 of the Interim Order).

2. Counterfeit Conduct Letters: The company submitted documents purportedly from IREDA and PFC confirming satisfactory loan servicing. When SEBI directly contacted both financial institutions, they categorically denied issuing any such letters (page 7 of the Order). SEBI examination showed these documents bore forged signatures and unauthorized use of official letterheads.

E. False Disclosures: Manufacturing Hype to Mislead Markets Gensol's management engaged in a systematic campaign of misleading disclosures designed to artificially inflate investor sentiment and prop up the company's faltering stock price. The investigation uncovered several egregious examples of corporate misrepresentation:

1. The 30,000 EV "Pre-Order" Mirage In January 2025: Gensol announced receiving pre-orders for 30,000 electric vehicles[5] through what it claimed were "strategic partnerships." However, SEBI's examination revealed these were merely non-binding Memorandums of Understanding (MoUs) with nine different entities, containing no concrete purchase commitments, pricing terms, or delivery schedules. These MoUs represented nothing more than expressions of interest, deliberately misrepresented as firm orders to create false market excitement.

2. The Phantom US Subsidiary: The company's February 2025 disclosure[6] about its US subsidiary Scorpius Trackers - claiming a ₹350 crore valuation - proved particularly audacious. Regulatory scrutiny revealed this was a shell company incorporated just four months prior in July 2024, with no operational history, employees, or tangible assets. When pressed by SEBI to justify the valuation, Gensol failed to provide any substantiating documentation or business rationale.

IV. LEGAL ISSUES AND VIOLATIONS IN THE GENSOL-BLUSMART CASE

1. Violation of the SEBI Act, 1992: The Securities and Exchange Board of India (SEBI), through its interim order dated April 15, 2025, invoked its powers under Sections 11(1), 11(4), and 11B of the SEBI Act, 1992[7] , to restrain Gensol Engineering Limited and its key promoters, Anmol Singh Jaggi and Puneet Singh Jaggi, from accessing or dealing in the securities market. This action was initiated after SEBI received a complaint in June 2024 regarding alleged manipulation of Gensol’s share price and diversion of company funds. The regulatory body found prima facie evidence that the funds raised by Gensol—especially from institutions like IREDA and PFC—were not used for declared purposes but were instead diverted towards luxury personal expenses such as the purchase of a Jaguar car, payment for a golf club membership, and extravagant foreign trips. These actions indicate misutilization of public funds and non-disclosure of material information, thereby violating the disclosure obligations and investor protection norms stipulated under the SEBI Act. By artificially inflating the company’s financials and misleading investors, the involved parties potentially contravened fundamental provisions intended to maintain transparency and integrity in the securities market.

2 Violation of SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003: Regulations 3 and 4 The actions of Gensol Engineering Ltd. and its promoters also fall within the scope of violations under the SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003, particularly Regulations 3 and 4[8]. Regulation 3 prohibits any person from engaging in fraudulent and unfair trade practices relating to securities, including market manipulation and use of misleading information. Regulation 4(1) specifically prohibits manipulative, fraudulent or unfair trade practices in securities markets, while Regulation 4(2)(f) and 4(2)(r) prohibit publishing misleading or false financial statements and misrepresentation of facts that induce transactions. According to SEBI’s interim order dated April 15, 2025, Gensol’s promoters were found to have diverted funds meant for renewable energy projects, sourced through public financial institutions like IREDA and PFC, towards personal luxury expenses. Such misutilization of company funds, combined with the failure to disclose true end-use of funds and an apparent effort to artificially inflate financial performance and share price, amounted to a clear case of market manipulation. By misleading investors and distorting the integrity of market information, these acts violate both the letter and spirit of SEBI’s 2003 Regulations designed to protect investor interests and ensure fair play in securities trading

3. Violation of Section 67 of the Companies Act, 2013 – Misuse of Company Funds to Trade in Its Own Shares Section 67 of the Companies Act, 2013 prohibits a public company from purchasing its own shares or providing financial assistance—either directly or indirectly—for the purpose of purchasing its own shares, except under limited circumstances such as a legitimate buy-back in accordance with the law[9] . In the case of Gensol Engineering Ltd., SEBI’s interim findings indicate a serious contravention of this provision. The company allegedly routed borrowed funds—received from government-backed lenders like IREDA and PFC—through a web of related entities and individuals, ultimately to manipulate its own stock price in the secondary market. Such actions not only misused public funds but also created an artificial demand for the company’s shares, giving a misleading appearance of growth and market confidence. This form of indirect financing, using proxies or connected parties to acquire its own shares, is squarely barred under Section 67, as it undermines market integrity and compromises transparency for shareholders and regulators alike.

V. EFFECTS OF THE SEBI CRACKDOWN AND BLUSMART COLLAPSE

The SEBI’s interim order has triggered a domino effect of severe repercussions for Gensol Engineering Ltd. and its subsidiary BluSmart. Founders Anmol and Puneet Jaggi have been barred from participating in the securities market and from holding key managerial positions, signaling the regulator’s intent to curb promoter-led abuse of public funds. Gensol has been ordered to halt its proposed stock split, which SEBI deemed potentially manipulative, and a forensic audit of the company and its interconnected entities is now underway. Additionally,The Securities Appellate Tribunal (SAT) has declined to stay the Securities and Exchange Board of India's (SEBI) interim order dated April 15, 2025, which barred Gensol Engineering Limited and its promoter-directors, Anmol Singh Jaggi and Puneet Singh Jaggi, from accessing the securities market. The broader fallout has been devastating—BluSmart, once hailed as a promising EV ride-hailing startup, suspended all operations pan-India, stranding nearly 10,000 drivers and 800 employees overnight.[10] For many drivers, the sudden halt came without warning or severance, leaving them unable to pay bills, school fees, or rent, and prompting mass protests in Delhi and beyond. Employees, too, face uncertain futures with delayed salaries and dwindling job prospects. As SEBI’s probe deepens, the case highlights the far-reaching human cost of corporate fraud and regulatory violations—affecting not just investors, but also frontline workers whose livelihoods hinge on responsible governance.

 VI. PREVENTING FUTURE COLLAPSES: KEY SUGGESTIONS

The BluSmart–Gensol collapse is a stark reminder of the devastating consequences of unchecked corporate misgovernance. To prevent similar failures in the future, a multi-pronged regulatory and institutional strategy must be adopted. The following are specific and actionable measures, supported by past examples, that regulators, investors, and companies must internalize:

1. Mandatory Real-Time Fund Tracking and Utilization Disclosure - One of the biggest takeaways from the Gensol-BluSmart collapse is the complete opacity in the use of raised funds, including NCD proceeds and institutional loans. To prevent such abuse, regulators like SEBI and RBI must require real-time fund utilization monitoring via registered third-party financial auditors. This can be enforced through blockchain-based ledgers or mandatory digital escrow accounts where each inflow and outflow is tagged with purpose-specific codes (e.g., capex, debt servicing, operations). Such a system will not only ensure accountability of promoters but also help investors and creditors assess the true financial health of the company without relying entirely on end-of-year audits.

2. Red flags such as rating downgrades, auditor resignations, sudden fund infusions or withdrawals, and frequent restructuring of debt should mandatorily trigger a forensic audit by independent agencies : This should be implemented through an automated system where specified events (e.g., three rating downgrades in six months) automatically alert SEBI and institutional lenders to commission a probe. In the Gensol case, credit rating agencies like ICRA and CARE[11] had already downgraded the company’s instruments months before the collapse[12] . Had forensic audits been launched then, a crisis of this magnitude may have been averted. Such trigger-based audits must not wait for whistleblower complaints or insolvency filings. Regulatory technology (Reg Tech) tools should be deployed to scan disclosures and detect patterns requiring investigation.

3. Strengthening Whistleblower Protections and Incentives: Many corporate collapses could be avoided if internal whistleblowers felt safe and empowered to report wrongdoing. Currently, India's whistleblower framework under SEBI and the Companies Act is underutilized due to fear of retaliation, lack of anonymity, and minimal follow-through. This needs urgent reform. We can take inspiration from the SEC Whistleblower Program in the U.S.[13] which allows anonymous complaints and offers financial incentives (up to 30% of penalties recovered) to successful whistleblowers. This has led to the exposure of major frauds like Enron and Wells Fargo. India needs to emulate this model by allowing secure anonymous reporting to regulators, followed by whistleblower reward schemes. Boards must also be mandated to review whistleblower reports quarterly and submit compliance reports.

4. Stronger Related-Party Transaction Disclosures and Group Entity Monitoring: A major structural issue in the BluSmart–Gensol setup was the lack of clear demarcation between group entities, resulting in misuse of funds through intra-group transfers. SEBI must strengthen rules related to disclosures of Related Party Transactions (RPTs) and ensure that all group entities — even unlisted ones — are subjected to financial audits and reporting obligations when linked to a listed parent. A “group responsibility” framework, similar to the UK's “Persons with Significant Control ” (PSC)[14] regime, should be implemented to hold promoters accountable across all companies in their control network.

VII. CONCLUSION

The Gensol-BluSmart scandal is not merely a tale of financial fraud—it is a stark reminder of how systemic lapses in corporate governance, regulatory oversight, and ethical leadership can bring even promising green ventures to the brink of collapse. What began as an innovative model linking electric mobility with renewable energy turned into a case study in how promoters, when left unchecked, can misuse public funds, deceive regulators, and manipulate markets for personal enrichment. The Jaggi brothers’ actions—ranging from fund diversion and forged documentation to share price manipulation—represent deep-rooted governance failures that eroded investor confidence, jeopardized public institutions like IREDA and PFC, and derailed the vision of sustainable transport. This case underscores the urgent need for stricter enforcement of corporate governance norms, real-time scrutiny of related-party transactions, and a culture of accountability in the boardrooms of Indian companies. Regulatory bodies like SEBI have taken commendable initial steps by initiating forensic audits and imposing market bans, but the incident highlights the necessity of proactive, rather than reactive, oversight. For India’s startup and sustainability ecosystem to thrive, trust must be restored through transparency, ethical leadership, and institutional checks. Only then can innovation truly serve the public good rather than private greed.

Authors- 1. Ravi Vaswani, Partner 2. Aarti Kumari, 4th Year student at NLIU, Bhopal.

[1] Gensol Engineering Ltd, 'Gensol Engineering Ltd Summary' (Screener) https://www.screener.in/company/GENSOL/consolidated/ accessed 3 May 2025.

[2] Gensol Engineering Ltd, 'Listing of 1,09,36,923 Equity Shares from BSE SME Platform to Main Board of BSE Limited' (Investor Release, 8 February 2022) https://gel.gensol.in/assets/uploads/investors_pdf/1658326893_2.pdf accessed 5 May 2025.

[3] National Stock Exchange of India, 'Statement Showing Shareholding Pattern of the Promoter and Promoter Group' (NSE, 2025) https://www.nseindia.com/companies-listing/corporate-filings-shareholding-pattern?symbol=GENSOL&tabIndex=equity accessed 5 May 2025.

[4] National Stock Exchange of India, 'SEBI Interim Order in the Matter of Gensol Engineering Limited' (15 April 2025) https://nsearchives.nseindia.com/content/circulars/INVG67564.pdf accessed 2 May 2025.

[5] Gensol Engineering Limited, ' Gensol EV Announces 30,000 Pre-orders for EZIO and EZIBOT at Bharat Mobility Expo 2025' (28 January 2025) https://nsearchives.nseindia.com/corporate/GENSOL_28012025093932_SigendPressReleaseGensolEVBharatMobility202528thJan2025.pdf accessed 5 May 2025.

[6] Gensol Engineering Limited, 'Gensol Engineering Unlocks Value with INR 350 Crore Strategic Deal for Scorpius Trackers' US Subsidiary' (25 February 2025) https://nsearchives.nseindia.com/corporate/GENSOL_25022025080628_SIGNEDNEWPressreleaseScorpiusTrackersUSdealfinal.pdf

[7] Securities and Exchange Board of India Act 1992, (Act No. 15 of 1992) ss 11(1), 11(4), 11B.

[8] SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations 2003, reg 3 & 4.

[9] The Companies Act 2013 (Act No 18 of 2013) s67.

[10] Jessica Rajan, 'BluSmart Drivers Protest Over Unpaid Dues, Demand Jobs After Shutdown' (Economic Times, 3 May 2025) https://economictimes.indiatimes.com/tech/startups/blusmart-drivers-protest-over-unpaid-dues-demand-jobs-after-shutdown/articleshow/120868184.cms

[11] CARE Ratings Limited, 'Gensol Engineering Limited' (CARE, 3 March 2025) https://www.icra.in/Rating/GetRationalReportFilePdf?id=133471.

[12] ICRA Limited, 'Gensol Engineering Limited: Ratings Downgraded' (ICRA, 4 March 2025) https://www.icra.in/Rating/GetRationalReportFilePdf?id=133471.

[13] U.S. Securities and Exchange Commission, 'Whistleblower Program' (Updated, 17 March 2025) https://www.sec.gov/enforcement-litigation/whistleblower-program accessed 2 May,2025.

[14] UK Government, People with Significant Control (PSCs): Guidance (Updated 9 February 2022) https://www.gov.uk/guidance/people-with-significant-control-pscs accessed 2 May 2025.