SEBI Action Against Gensol Engineering Ltd (GEL)

In a significant regulatory move, the 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 market due to serious corporate governance lapses and fund diversion. The action was initiated following a complaint received in June 2024, highlighting manipulation of share prices and misuse of company funds. The case has become a prominent example of how regulatory bodies ensure accountability and protect investor interests.

Key Points of the SEBI Order

1. Background

• Complaint received by SEBI in June 2024.
• Allegations: Share price manipulation and fund diversion by promoters of GEL.
• SEBI initiated a detailed investigation.

2. Regulatory Action Taken

• GEL and promoters barred from securities markets until further notice.
• Promoters Anmol Singh Jaggi and Puneet Singh Jaggi barred from acting as directors/key managerial personnel in GEL.
• Stock split announced by GEL put on hold.

3. Findings of SEBI

• Promoters ran GEL like a proprietary firm.
• Company funds treated as a personal piggy bank by the Jaggi brothers.
• Funds were diverted to related parties and spent on unrelated expenses.
• Prima facie evidence of misuse and fraudulent diversion of funds.

4. Violations Identified

• Violation of PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) regulations.
• Submission of forged conduct letters to SEBI, lenders, and credit rating agencies.
• Misleading disclosures aimed at investor and lender deception.

5. Internal Control Lapses

• GEL exhibited weak internal controls.
• Layered transactions used to divert funds seamlessly to related entities.
• Even ring-fenced borrowings from institutional creditors were rerouted.
• Reflected a culture of poor corporate governance.

6. SEBI Directives

Appoint a forensic auditor to examine,

• GEL’s books of accounts.
• Transactions with related parties.
• Forensic audit to uncover the true extent of misutilization.