NCLT admits insolvency plea against Gensol Engineering

The National Company Law Tribunal (NCLT), Ahmedabad Bench, has admitted an insolvency petition against Gensol Engineering Limited filed by state-owned lender Indian Renewable Energy Development Agency Limited (IREDA). The petition cites a massive default of ₹510.10 Crore on loan facilities extended for various solar and electric vehicle (EV) projects.

Key Findings of the Tribunal

1. Proven Debt & Default: The NCLT Bench, comprising Member (Judicial) Shammi Khan and Member (Technical) Sanjeev Kumar Sharma, concluded that IREDA successfully established the existence of a “financial debt” and a clear “default” by Gensol under Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016. The default amount far exceeds the IBC threshold of ₹1 Crore.
2. Specific Defaults Identified:
   • Facility 4 (MAHAGENCO Solar Project): Default on ₹48.22 Crore instalment due March 31, 2025. Overdues stand at ₹78.19 Crore after partial recovery via bank guarantee invocation.
   • Facility 5 (Guarantee Assistance): Default arising from ₹71.34 Crore paid by IREDA under invoked guarantees (including payments to NTPC & MAHAGENCO) from April 19, 2025, deemed a loan repayable on demand. Overdues: ₹160.96 Crore.
   • Facilities 1, 2 & 3 (EV Leasing & DVC Solar): Cross-default triggered on May 12, 2025, due to defaults on Facilities 4 & 5, uncured despite notice. Overdues: ₹270.94 Crore.
3. Evidence Relied Upon: The Tribunal accepted IREDA’s evidence, including ledger extracts, Trust and Retention Account (TRA) bank statements, demand notices, National E-Governance Services Ltd (NeSL) default records, and loan agreements, as conclusive proof of the defaults.
4. Governance Concerns: The order referenced a SEBI interim order (April 15, 2025) restraining Gensol Engineering promoters from directorial positions due to fund misutilisation and a Debt Recovery Tribunal (DRT) order (May 28, 2025) appointing a Receiver for secured assets, reinforcing concerns about the company’s financial management and viability.
5. Corporate Debtor’s Defences Rejected: Gensol’s arguments that the petition was premature, lacked evidence, or misused the IBC for recovery were dismissed. The Tribunal held that proven debt and default under Section 7 take precedence, and Gensol’s cited revenue growth was outweighed by significant liabilities exceeding ₹600 Crore and governance issues.
6. Conflict of Interest in Proposed IRP: While admitting the petition, the Tribunal agreed with objection of Gensol Engineering to IREDA’s proposed Interim Resolution Professional (IRP), Pulkit Gupta (EY Restructuring LLP). Evidence showed an undisclosed prior relationship via Ernst & Young LLP, raising concerns about independence under IBBI regulations. The Tribunal deemed Gupta ineligible.

Consequences of Admission

1. CIRP Initiated: Corporate Insolvency Resolution Process (CIRP) is initiated against Gensol Engineering Ltd effective immediately.
2. Moratorium Imposed: A comprehensive moratorium under Section 14 IBC comes into force, prohibiting:
   • New lawsuits or continuation of existing suits/proceedings against Gensol.
   • Transfer, encumbrance, or disposal of Gensol’s assets.
   • Foreclosure or enforcement of security interests by any creditor.
   • Recovery of property by owners/lessors where Gensol is in possession.
   • (Exceptions apply as per notified transactions and surety actions).
3. New IRP Appointed: Keshav Khaneja (Reg. No. IBBI/IPA-002/IP-N01131/2021-2022/13759) is appointed as the new IRP. He is mandated to take charge of Gensol’s assets and operations, make a public announcement, form a Committee of Creditors (CoC), and manage the company as a going concern.
4. Advance Cost: IREDA must pay ₹20 Lakh to the IRP within 7 days to meet initial CIRP costs.

Background

IREDA, a ‘Navratna’ public financial institution under the Ministry of New & Renewable Energy, had sanctioned five loan facilities aggregating ₹863.30 Crore to Gensol between March 2022 and May 2024 for projects including EV fleet leasing (with Blu-Smart), a solar project for Damodar Valley Corporation, and a 62 MW solar project for MAHAGENCO. Gensol’s repeated failures to meet repayment obligations, culminating in defaults in March, April, and May 2025, led IREDA to file the Section 7 petition on May 13, 2025.

Also Read: IREDA files Section 19 plea against Gensol Engineering in DRT