Mumbai: The Securities Appellate Tribunal (SAT) on Wednesday refused to grant interim relief to Gensol Engineering Ltd, which is being investigated by the Securities and Exchange Board of India (Sebi) for alleged fund misutilization and fraudulent disclosures.
While SAT did not stay Sebi’s 15 April, it instructed Gensol to file a response to Sebi’s show-cause notice within two weeks. A confirmatory order from Sebi is expected four weeks after the hearing.
On 15 April, Sebi barred Gensol’s founder-promoters, Anmol Singh Jaggi and Puneet Jaggi, from the securities market and from holding executive roles at the company, citing the diversion of funds and misuse of loan proceeds. Gensol has contested the order, arguing that Sebi presented a distorted narrative that caused significant reputational and commercial harm.
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Legal experts note that Gensol still has avenues for appeal, including approaching the Supreme Court or challenging the confirmatory order once issued.
“While SAT appears to have declined interim relief at this stage, Gensol retains the right to challenge the final confirmatory order once issued by Sebi,” said Saiyam Chaturvedi, partner at DMD Advocates. “Additionally, there is scope for seeking recourse before the Supreme Court in exceptional circumstances.”
However, some experts are sceptical about the Supreme Court intervening at this stage.
“Gensol is entitled to approach the Supreme Court against Sebi’s ex-parte order, but now that SAT has given four weeks to Sebi to pass a confirmatory order, and granted the company an opportunity of hearing, the apex court may choose not to intervene, as principles of natural justice have been complied with,” said Chirag M. Shah, a senior securities lawyer.
Akshaya Bhansali, partner at Mindspright Legal, echoed this sentiment, suggesting that Gensol focus on a governance strategy instead.
“The company should approach the Ministry of Corporate Affairs (MCA) and cooperate with proceedings before the National Company Law Tribunal (NCLT) for the appointment of a new set of directors,” Bhansali said. “Quick action and support from the government is of prime importance so that the funds provided by the PFC, Ireda, and investors are not jeopardized due to the mismanagement of key functionaries of the company.”
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In its appeal, Gensol described Sebi’s order–barring the company and its executives from the securities market–as “selective and sensationalist,” stating it caused irreparable damage without providing an opportunity to be heard.
“The order has selectively examined facts and intentionally leaves out facts to try and attempt to make out a case of ad interim directions,” the appeal stated. It further alleged that Sebi failed to consider the cascading consequences on shareholders and business continuity. “If anything, the effect of the said order is counter-intuitive and directly harms public shareholders,” Gensol contended.
The appeal highlighted that the company’s stock has dropped by more than 90%, and clients like NTPC and JSW have either cancelled or threatened to exit contracts.
“The news in the media in the last couple of weeks about Gensol has thoroughly destroyed its image,” the company said, warning that even a profitable business could now face insolvency.
A key Sebi allegation was that Gensol misused a ₹71.41 crore loan from IREDA to purchase a luxury apartment via Capbridge LLP, a related party. Gensol denied this, emphasizing that Sebi’s order itself acknowledged Capbridge had repaid ₹47.50 crore to Go-Auto on 31 March 2023.
“The fact related to the purchase of the flat by CapBridge has unnecessarily been highlighted just to gain some media leverage and create a media frenzy around the same, all the while deliberately ignoring and negating the fact that the purchase of the said property by CapBridge has not come at the cost of Gensol’s expense whatsoever,” the appeal added.
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The company also criticized Sebi for not providing an opportunity to respond before imposing sweeping market restrictions. “These incorrect facts… could have been entirely avoided if Sebi provided an opportunity to Gensol to rebut the specific charges,” it said.
