Gensol Engineering case: Now, NFRA joins investigation against promoters

The National Financial Reporting Authority (NFRA) is looking into the allegations of fund diversion against promoters of Gensol Engineering, according to top government sources. The NFRA intervention comes in the wake of the Securities and Exchange Board of India (Sebi) referring the matter to the auditing and accounting regulator for inspection, sources said. 

In an interim order dated April 15, India’s stock market regulator Sebi had flagged a steep decline in the promoters’ stake in Gensol, noting that this was allegedly not organic but orchestrated through a network of false disclosures, sham transactions, and diverted funds, which effectively led to a near-total promoter exit, even as unsuspecting investors were left holding the can. Sebi has barred Anmol Singh Jaggi and Puneet Singh Jaggi from trading in securities and holding the position of a director or a key managerial personnel in Gensol. 

NFRA’s domain extends to audit firms of listed companies and unlisted companies with over ₹500 crore paid up capital or ₹1,000 crore annual turnover. NFRA can also investigate auditors of insurance companies, banking companies, and companies engaged in the generation or supply of electricity, among others. 

  On Wednesday, the Financial Reporting Review Board (FRRB) of the Institute of Chartered Accountants of India (ICAI) also announced a suo moto review of the financial statements and the statutory auditor’s report of Gensol Engineering and BluSmart Mobility Private Limited for 2023-24 (FY24). The FRRB reviews compliance with the reporting requirements of various applicable statutes, accounting standards, and standards on auditing of auditors. 

According to Gensol’s annual report for FY24, the company had appointed Ahmedabad-based Talati & Talati LLP to “closely monitor the adequate internal financial controls with reference to the financial statement.” K C Parikh & Associate Chartered Accountants, Ahmedabad were appointed statutory auditors of the company. 

As Business Standard reported earlier this week, a probe by the Serious Fraud Investigation Office (SFIO) into Gensol Engineering and its promoters is under consideration. Separately, the Ministry of Corporate Affairs, is also conducting its due diligence in the Gensol Engineering fund diversion matter through its Director General, and the Registrar of Companies. 

Gensol Engineering, it has been alleged, submitted “conduct letters” and “no objection certificates” in the names of Power Finance Corporation and Indian Renewable Energy Development Agency, which the lenders allegedly discovered were forged by the company.