New Delhi: The funds diversion and mismanagement by Gensol Engineering Limited (GEL)  (also co-founders BluSmart) promoters Anmol Singh Jaggi and Puneet Singh Jaggi seems to have rattled the corporate sector with memories of similar corporate mismanagement ringing the bell.

Securities and Exchange Board of India (SEBI) has passed an interim order barring Jaggi brother from accessing the securities market and halted Gensol’s proposed stock split. The promoter brothers have now stepped down as the company’s directors following the market regulator’s orders.

The market regulator found that loans taken to buy EVs for the ride-hailing service BluSmart were routed through multiple entities and ultimately used for personal gains which includes a luxury apartment in Gurugram’s upscale residential project — The Camellias by DLF. 

“Funds availed by Gensol as loans for procuring EVs were, through layered transactions, partly utilised for buying a high-end apartment in The Camellias, Gurugram, in the name of a firm where the MD of Gensol and his brother are designated partners,” SEBI the market regulator said in its interim order.

“…records show that the company received loans aggregating Rs. 663.89 Crore for the stated purpose from IREDA and PFC. Gensol was to provide an additional equity (margin) contribution of 20%, bringing the total expected deployment of approximately Rs. 829.86 Crore for the purchase of 6,400 Electric Vehicles. Based on these figures, an amount of Rs. 262.13 Crore (Rs. 829.86 Crore – Rs. 567.73 Crore) remains unaccounted, even though more than a year has passed since the Company availed the last tranche of the above mentioned financing,” SEBI interim order reads.

Will the corporate or start-up sector be impacted by the taint amidst corporate governance failures, and a brazen treatment of company money as the “promoters’ piggybank”?

Tarun Singh, MD and Founder, Highbrow Securities told Zee News,”This is not an isolated incident—Byju’s, once India’s most valuable edtech startup, now stands accused of similar excesses: alleged financial opacity, delayed audits, and reports of lavish spending while employees and vendors went unpaid. These cases are symptoms of a deeper malaise.”

He said that Startups, especially in their early stages, operate in a regulatory grey area where oversight is minimal, and the line between personal and company finances is often blurred. 

“The argument that future profits will justify today’s excesses is not just flawed—it is dangerous. If promoters can freely dip into company coffers under the assumption that future profits will cover their tracks, then every startup and listed firm becomes a potential Ponzi scheme—where today’s theft is masked by tomorrow’s promised returns. With the company now barred from fresh capital, its stock faces permanent de-rating. Markets have a long memory when it comes to governance failures – this stain will linger long after the headlines fade, crushing both valuation and investor confidence,” Singh added.

Singh however does not believe that the Gensol controversy can cast a spell of gloom on the entire start-up echosystem.

“The Gensol controversy won’t cripple India’s startup ecosystem; its strategic importance is too great to be undermined by isolated failures. But every such episode serves a purpose: founders will grow more conscientious, investors will tighten term sheets, and the market will mature. While systemic disruption is unlikely, Gensol will continue to  haunt deal rooms as the definitive case of how governance gaps incinerate valuations faster than growth can create them,” he opined.