In a major development that has sent shockwaves across the Indian corporate and startup ecosystem, the Ministry of Corporate Affairs (MCA) has ordered a formal probe into Gensol Engineering and BluSmart Mobility for alleged financial misappropriation and violations of regulatory norms. This follows damning allegations from capital markets regulator SEBI and the Enforcement Directorate (ED).

According to a PTI report dated May 6, the investigation is being conducted under Section 210 of the Companies Act, 2013, which authorizes the MCA to order an inspection of company affairs if it is in the public interest or based on credible evidence of mismanagement or fraud.

Gensol’s Unraveling: From EV Promoter to Controversy Epicenter

Gensol Engineering, once touted as a promising player in India's clean mobility space, has witnessed a freefall in its stock price, hitting the lower circuit for the 18th consecutive session, with an over 95% decline from its all-time high. As of May 2025, the stock has lost 91% of its value this year alone.

The primary catalyst for this collapse has been the allegations by SEBI against company promoters Anmol and Puneet Jaggi, who allegedly diverted funds meant for electric vehicle (EV) procurement towards personal luxuries, including:

• A luxury apartment at DLF’s The Camellias in Gurugram

• Golf equipment worth ₹26 lakh

These funds were supposed to be used for purchasing 6,400 EVs, which were to be leased to BluSmart, the ride-hailing platform co-founded by the Jaggi brothers in 2019.

Funding Trail Raises Red Flags

Between 2021 and 2024, Gensol Engineering availed ₹978 crore in term loans from government institutions Ireda and PFC. Out of this, ₹664 crore was earmarked specifically for buying EVs to be leased to BluSmart. The company was also expected to contribute 20% equity, bringing the total expected deployment to ₹830 crore.

However, an investigation by SEBI revealed:

• Only 4,704 EVs were procured instead of the promised 6,400

• The cost incurred for the 4,704 vehicles was ₹568 crore, as confirmed by EV supplier Go-Auto

• A differential of ₹262.13 crore remains unaccounted for, even after a year since the last tranche was disbursed

This discrepancy in the use of public funds and loans has triggered widespread regulatory concern.

Regulatory Action Escalates: SEBI, ED, ICAI, and Now MCA

Gensol is now under scrutiny from four separate entities:

1. Securities and Exchange Board of India (SEBI) – Issued a debarment order against Anmol and Puneet Jaggi, barring them from holding any directorial positions and from accessing the capital markets

2. Enforcement Directorate (ED) – Probing potential money laundering angles in the fund diversion

3. Institute of Chartered Accountants of India (ICAI) – Reviewing the financial statements of both Gensol and BluSmart, with a report expected within six months

4. Ministry of Corporate Affairs (MCA) – Initiated probe under Section 210 to assess broader corporate governance violations

BluSmart Operations Suspended Without Explanation

The fallout has also impacted BluSmart Mobility, the EV ride-hailing service that has suspended its services. On April 17, the company emailed users stating:

“We’ve decided to temporarily close bookings on the BluSmart app.”

No specific reasons were provided, though insiders cite the regulatory crackdown and funding crisis as the driving factors.

BluSmart was previously seen as a flagship clean mobility startup, often backed by institutional funds and hailed for promoting sustainable urban transport.

Investor Sentiment in Tatters

The market's reaction has been brutal:

• Gensol Engineering shares have crashed over 95% since listing in 2023

• Investors have lost crores in market capitalisation within weeks

• Market confidence in EV infrastructure startups and government loan monitoring is now severely shaken

Systemic Risk and Public Interest Concerns

The MCA probe under Section 210 is critical, as it underscores public interest violations, which could lead to:

• Prosecution under various provisions of the Companies Act, 2013

• Potential recovery proceedings against the promoters

• Broader industry-wide audits for companies using government-backed clean mobility financing

The Ministry’s intervention reflects the increased scrutiny of startups, especially those that benefit from public sector funding or subsidies.

Final Thoughts: A Wake-Up Call for the Clean Mobility Ecosystem

The unraveling of Gensol and BluSmart is not just an isolated financial scandal but a case study on corporate governance lapses in India's rapidly evolving EV and clean-tech sector. With multiple regulatory agencies involved, the case is likely to become one of the most closely watched in the Indian startup ecosystem.

The episode also raises serious questions on:

• Monitoring of public loans and grants

• Transparency in startup accounting practices

• Corporate governance in founder-led businesses

This is a cautionary tale for both investors and regulatory bodies that underscores the importance of accountability, transparency, and ethical leadership in high-growth sectors like clean mobility and renewable energy.

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