Ireda Moves NCLT Against Gensol for Rs 510 Cr Loan Default

State-run green energy financier seeks insolvency proceedings against renewable energy firm amid allegations of fund misuse and governance issues

In a significant development within India’s renewable energy sector, the Indian Renewable Energy Development Agency (Ireda) has filed an insolvency petition against Gensol Engineering Limited for defaulting on a loan amounting to Rs 510 crore. This action, initiated under Section 7 of the Insolvency and Bankruptcy Code (IBC) on May 14, 2025, underscores growing concerns over financial mismanagement and governance lapses in the industry. The move comes amidst a series of regulatory actions and investigations into Gensol, including allegations of fund diversion and falsification of documents, as reported in a stock exchange filing (Business Standard).

Background on Ireda and Gensol

Ireda, a government-owned Mini Ratna Category-I public sector undertaking under the Ministry of New and Renewable Energy, is a leading financier for renewable energy projects in India. It supports the country’s green energy transition by providing loans for solar, wind, and other sustainable initiatives. Gensol Engineering, a publicly listed company based in Ahmedabad, specializes in engineering, procurement, and construction (EPC) services for solar power projects. Additionally, Gensol has ventured into the electric mobility sector through its association with BluSmart, an electric ride-hailing platform co-founded by Gensol’s promoters, Anmol Singh Jaggi and Puneet Singh Jaggi (Entrackr).

Loan Details and Default

Gensol Engineering secured loans totaling Rs 977.75 crore from Ireda and Power Finance Corporation (PFC). Of this amount, Rs 663.89 crore was specifically allocated for purchasing electric vehicles for BluSmart, a company closely tied to Gensol’s promoters. However, Gensol failed to meet its repayment obligations, resulting in a default of Rs 510,00,52,672, as disclosed by Ireda in its regulatory filings. This substantial default prompted Ireda to escalate the matter to the NCLT, seeking to recover its dues through insolvency proceedings (Times of India).

Loan Breakdown

Insolvency Proceedings

On May 14, 2025, Ireda formally filed an application with the National Company Law Tribunal (NCLT) under Section 7 of the IBC to initiate corporate insolvency resolution proceedings (CIRP) against Gensol. Section 7 empowers financial creditors to seek resolution or liquidation of a debtor company when a default is established. If the NCLT admits the petition, a court-appointed resolution professional will oversee the process, requiring all creditors to submit their claims. This could lead to a restructuring of Gensol’s debts or, in extreme cases, its liquidation, potentially wiping out the company’s equity value (Reuters).

Regulatory Scrutiny and Leadership Changes

The insolvency petition is part of a broader series of regulatory actions against Gensol. In late April 2025, Ireda filed a complaint with the Economic Offences Wing (EOW) on April 24, 2025, accusing Gensol of falsifying documents and diluting promoter holdings without approval, in breach of contract terms. Power Finance Corporation, another lender, also filed similar allegations, indicating a pattern of financial irregularities (Business Standard).

The Securities and Exchange Board of India (SEBI) has been investigating Gensol for alleged fund diversion by its promoters. On April 15, 2025, SEBI issued an interim order barring Anmol Singh Jaggi (Managing Director) and Puneet Singh Jaggi (Whole-time Director) from holding key positions in the company. SEBI alleged that the brothers diverted funds raised by Gensol for personal luxury purchases, including a high-end apartment, and engaged in stock manipulation (Bar and Bench). Following SEBI’s directive, the Jaggi brothers resigned from the Gensol board on May 12, 2025, in compliance with the regulator’s instructions (Entrackr).

Additionally, SEBI’s investigation revealed that Gensol submitted forged “No Objection Certificates” and conduct letters to credit rating agencies, further compounding its governance issues. The Enforcement Directorate also raided Gensol’s premises in late April 2025, seizing documents and electronic devices, signaling intensified scrutiny (NDTV Profit).

Market Reaction

The insolvency filing has significantly impacted Gensol’s stock performance. Prior to the filing, the company’s shares were locked in the lower circuit for 18 consecutive trading sessions, reflecting investor concerns over its financial health and governance practices. On May 14, 2025, the day of the filing, Gensol’s shares closed at Rs 60 per share, marking a 5% increase. On May 15, 2025, the stock hit a 5% upper circuit, trading at Rs 62.44 apiece, with a market capitalization of approximately Rs 240 crore. The stock’s 52-week high stands at Rs 1,124.9, while its 52-week low is Rs 51.25, indicating significant volatility (Moneycontrol).

Stock Performance Snapshot

Broader Implications

The case against Gensol raises critical questions about corporate governance and financial transparency in India’s renewable energy sector. The allegations of fund diversion and falsified documents highlight the risks associated with large-scale financing for green energy projects. The insolvency proceedings may serve as a cautionary tale for other companies, prompting stricter oversight by regulatory bodies like SEBI and the Ministry of New and Renewable Energy. The outcome could also influence lending practices, with financial institutions potentially adopting more rigorous risk assessment protocols for renewable energy ventures (Times of India).

Moreover, the case has potential implications for related entities, such as BluSmart, given the involvement of the Jaggi brothers as co-founders. The financial and regulatory challenges faced by Gensol could impact investor confidence in the broader electric mobility and renewable energy sectors, underscoring the need for ethical governance and robust financial management.

You Learn

Ireda’s insolvency action against Gensol Engineering marks a pivotal moment for India’s renewable energy industry.

With regulatory scrutiny intensifying, leadership changes at Gensol, and the looming possibility of insolvency proceedings, the case highlights the challenges of managing large-scale financing in a rapidly growing sector.

As stakeholders await the NCLT’s decision, the situation will likely have far-reaching implications for Gensol, its creditors, and the broader renewable energy landscape in India.

The case serves as a reminder of the importance of transparency and accountability in driving sustainable growth.