Gensol Engineering Promoters Under Fire; Found Guilty of Diverting Co’s Funds for Personal Purposes; All You Need to Know

Markets regulator Securities and Exchange Board of India (SEBI) has barred Gensol Engineering Ltd (GEL) and its promoters, Anmol Singh Jaggi and Puneet Singh Jaggi from participating in the securities markets with immediate effect. The development comes following allegations of financial misconduct, including funneling of funds for personal purposes, reported Business Today.

SEBI has even directed Gensol Engineering Ltd (GEL) to hold a stock split of the enterprise.

Usage of company’s funds for personal purposes

As per SEBI order, promoters Anmol Singh Jaggi and Puneet Singh Jaggi diverted company’s loans for personal use, which includes purchase of luxury real estate in Gurgaon.

The market regulator noted that the promoters were running the company as if it were a proprietary firm. The engineering company’s funds were diverted to related parties and used for unconnected expenses.

A 29-page interim order of SEBI said, “The prima facie findings have shown mis-utilisation and diversion of funds of the company (GEL) in a fraudulent manner by its promoter directors, Anmol Singh Jaggi and Puneet Singh Jaggi, who are also the direct beneficiaries of the diverted funds.”

How were funds misappropriated?

According to SEBI’s interim order, Gensol Engineering secured a loan of ₹42.94 crore, which was ultimately routed through Capbridge Ventures to finance the purchase of a luxury apartment in DLF Camellias.

Jaggi also used ₹50 lakh to invest in Ashneer Grover’s startup, Third Unicorn.

An amount of ₹6.20 crore was also transferred to Anmol Singh Jaggi’s mother, while his wife received ₹2.98 crore. Jaggi also spent ₹26 lakh on a golf set and ₹3 lakh on MakeMyTrip for personal travel.

These unscrupulous transactions meant that diverted funds at some point had to be written off from Gensol's books, which resulted in losses to the investors of the company.

“...prima facie evidence of a blatant violation of rules of corporate governance is writ large over the workings of the company. The diversion of funds of the company (GEL) by promoter entities reflects a culture of weak internal control, where even ring-fenced borrowings from institutional creditors were rerouted at the total discretion of the promoters,” Sebi's whole-time member Ashwani Bhatia said in the order.