NCLT allows Centre to attach bank accounts, lockers of Gensol, subsidiaries & individuals

The Ahmedabad bench of the NCLT has allowed the Centre to attach the bank accounts and lockers of Gensol Engineering, its 10 subsidiaries and several individuals
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NCLT allows Centre to attach bank accounts, lockers of Gensol, subsidiaries & individualsEnergy Watch
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New Delhi: The Ahmedabad bench of the National Company Law Tribunal (NCLT) has allowed the Central government to attach the bank accounts and lockers of Gensol Engineering Limited, its 10 subsidiaries and several individuals, noting that investigation reports and regulatory findings by multiple government agencies have revealed a systemic fraud. “It is averred that the Respondent companies are found to be in blatant violation of corporate governance norms, including diversion of funds by promoter entities, rerouting of borrowings raised for specific purposes in a fraudulent and illegal manner, which amounts to gross violations of the Companies Act, 2013,” said the NCLT in an order dated May 28.

“Investigations under Section 210(1)(c) and 219 of the Companies Act, 2013 are currently underway by Inspectors appointed by the Ministry of Corporate Affairs,” the order stated.

“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 has caused irreparable harm to public shareholders, creditors, and other stakeholders,” the company court noted.

The order was issued by the court on the basis of the investigations conducted by the Ministry of Corporate Affairs, Securities and Exchange Board of India (SEBI) and the Serious Fraud Investigation Office (SFIO).

Gensol Engineering case: NCLT lists case for next hearing on June 3

The court has now listed the matter for next hearing on June 3. The bench comprised of Mohan Prasad Tiwari and Reena Sinha Puri. This particular order by the NCLT bench was issued on the petition filed by the Ministry of Corporate Affairs. One of the provisions of the Company Act invoked by the ministry is Section 339, which allows holding directors, managers or other officers, who are party to a fraud, to be personally responsible, without any limitation of liability, for all or any of the debts or other liabilities of the company. The ministry had also asked the court to direct the Reserve Bank of India (RBI) and the Indian Banks Association (IBA) to freeze the bank accounts and lockers owned by the respondents and allow the Central government to attach the same. This request has been granted by the NCLT.

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DRT asks Gensol to maintain 'status quo' on secured assets & vehicles

IREDA’s insolvency plea against Gensol

Earlier this month, state-run Indian Renewable Energy Development Agency (IREDA) had initiated insolvency proceedings against Gensol Engineering and Gensol EV Lease Pvt Ltd to recover a loan of Rs 728.95 crore. The non-banking financial company also moved the Debt Recovery Tribunal against Gensol. Power Finance Corporation (PFC), the other state-run lender to have extended loans to Gensol Engineering, has classified the loan account as ‘fraud’ and has also moved the DRT to recover a loan of Rs 263 crore.

An investigation by SEBI found that the founders of Gensol Engineering had allegedly siphoned off loans from PFC and IREDA for non-related and personal expenses.

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