NCLT Admits Gensol Engineering for Insolvency Resolution Over ₹510 Crore Default
In a significant corporate development, the National Company Law Tribunal (NCLT) has admitted Gensol Engineering Ltd. and its subsidiary Gensol EV Lease Ltd. for insolvency resolution proceedings. The decision comes following petitions filed by the Indian Renewable Energy Development Agency Ltd. (IREDA) claiming substantial defaults totaling over ₹728 crore across both entities.
IREDA's Insolvency Petitions
The insolvency proceedings were initiated after IREDA filed applications under Section 7 of the Insolvency and Bankruptcy Code, 2016 on May 14, 2025. The state-run renewable energy financing agency claimed a default of ₹510 crore against Gensol Engineering and a separate default of ₹218.95 crore against Gensol EV Lease.
These substantial defaults highlight the financial distress faced by the renewable energy company and its electric vehicle leasing arm. The timing of these defaults is particularly significant given the current focus on clean energy transitions and electric mobility solutions in India.
NCLT's Admission Decision
On June 13, 2025, NCLT Judicial Member Shammi Khan and Technical Member Sanjeev Kumar Sharma delivered their order admitting both companies for Corporate Insolvency Resolution Process (CIRP). The tribunal found that IREDA's petition against Gensol Engineering satisfied the substantive requirements under Section 7 of the Insolvency and Bankruptcy Code.
The NCLT noted that parallel Debt Recovery Tribunal (DRT) proceedings against both firms do not prevent the initiation of CIRP, as no moratorium existed before admission. Upon admission, the moratorium under Section 14(1) of IBC will override such proceedings, providing legal clarity on the precedence of insolvency proceedings.
Appointment of Interim Resolution Professional
In an interesting turn of events, the NCLT appointed an alternative Interim Resolution Professional (IRP) while rejecting IREDA's proposed candidate. IREDA had initially proposed Pulkit Gupta from EY Restructuring LLP for both companies, but Gensol Engineering raised objections citing prior undisclosed relationships.
The tribunal expressed concerns about the eligibility of the proposed IRP due to these undisclosed relationships, necessitating the appointment of an alternative professional. Keshav Khaneja was appointed as IRP for both Gensol Engineering and Gensol EV Lease, ensuring independent oversight of the resolution process.
Regulatory Concerns and Governance Issues
The insolvency proceedings come against the backdrop of serious regulatory concerns. In April 2025, the Securities and Exchange Board of India (SEBI) issued an interim order barring Gensol's promoters from the securities market due to alleged fund diversions and corporate governance lapses.
The NCLT specifically referenced both the DRT order from May 28 and SEBI's April 15 order, stating that these regulatory actions reinforce the need for a corporate insolvency resolution process. The tribunal emphasized that the proceedings are necessary to protect creditors and address governance issues within the company.
Impact on Renewable Energy Sector
Gensol Engineering's financial troubles represent a significant development in India's renewable energy landscape. The company has been involved in solar energy projects and electric vehicle solutions, sectors that are crucial to India's clean energy ambitions.
The insolvency proceedings may have broader implications for:
- Project execution: Ongoing renewable energy projects may face delays or restructuring
- Investor confidence: The sector may see increased scrutiny of corporate governance practices
- Financing conditions: Lenders may adopt more stringent due diligence processes
- Market consolidation: Stronger players may acquire distressed assets at favorable valuations
IREDA's Position as Financial Creditor
IREDA's role as the petitioning financial creditor highlights the challenges faced by government-backed financing institutions in the renewable energy sector. As a specialized lender focused on renewable energy projects, IREDA's substantial exposure to Gensol demonstrates the risks associated with sector-specific lending.
The agency's decision to pursue both DRT proceedings and insolvency resolution simultaneously reflects a comprehensive approach to debt recovery. This strategy ensures multiple avenues for creditor protection while maximizing recovery prospects.
Resolution Process Timeline and Expectations
With the appointment of Keshav Khaneja as IRP, the resolution process will now commence under the statutory timeline prescribed by the Insolvency and Bankruptcy Code. The IRP has 180 days (extendable by 90 days) to prepare a resolution plan or recommend liquidation.
During this period, the IRP will:
- Conduct a detailed assessment of the companies' assets and liabilities
- Invite resolution plans from potential investors
- Manage day-to-day operations under the moratorium protection
- Coordinate with the Committee of Creditors for decision-making
Market Implications and Investor Outlook
The admission of Gensol Engineering and its subsidiary for insolvency proceedings sends a strong signal about the importance of corporate governance and financial discipline in the renewable energy sector. This case may serve as a precedent for how regulatory authorities handle similar situations in growth sectors.
For potential investors and bidders, the insolvency process may present opportunities to acquire renewable energy assets and capabilities at discounted valuations. However, they will need to carefully evaluate the underlying business fundamentals and regulatory compliance issues.
The outcome of this case will likely influence lending practices in the renewable energy sector and may lead to enhanced due diligence requirements for future financing arrangements.
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