Investigation reports, regulatory findings support MCA’s claim of systemic fraud in Gensol: NCLT

NCLT grants interim reliefs to MCA in systemic fraud case involving Gensol Engineering, freezing accounts and assets.

The vacation bench of National Company Law Tribunal (NCLT), Ahmedabad on Wednesday said investigation reports and regulatory findings prima facie support the Union Ministry of Corporate Affairs (MCA) claims of systemic fraud  by promoters of Gensol Engineering Ltd. and related entities and granted the interim reliefs sought by the Ministry. 

However, the NCLT’s order did not specify the reliefs. Media reports said relief included freezing of accounts held by Gensol and its promoters, among others.

Gensol Engineering Ltd. along with other respondent companies and associated individuals, have committed grave violations of corporate governance norms, the counsel for the Ministry of Corporate Affairs told NCLT.

The funds, raised for specified purposes by the companies, were illicitly transferred to various related parties, in gross violation of the provisions of the Companies Act, 2013. The pattern of illegal fund diversion, asset misstatement, and share price manipulation had caused irreparable harm to public shareholders, creditors, and other stakeholders, he noted.

Considering the emergent nature of the case, the substantial public interest involved, and the possibility of further dissipation of evidence or assets, NCLT said it finds it appropriate to grant exemption from advance service of the Company Petition on the Respondents.

The Tribunal, based on available records, noted serious allegations of fraudulent conduct, including diversion of company funds by the promoters of Gensol Engineering  and related entities, violation of corporate governance norms, manipulation of financial statements, default in loan repayments despite false declarations, and illegal alienation of company assets.

 The investigation reports and regulatory findings from the Ministry of Corporate Affairs, Securities and Exchange Board of India  (SEBI), and Serious Fraud Investigation Office prima facie support the  Ministry of Corporate Affairs claims of systemic fraud involving substantial public interest, NCLT said.