Delhi High Court orders seizure, relocation of 129 BluSmart vehicles

The Delhi High Court on Thursday directed the seizure and relocation of 129 electric passenger vehicles hypothecated to STCI Finance Ltd (plaintiff/ lender) by Gensol and BluSmart after the lender alleged that the companies had defaulted on a ₹15 crore loan and was seeking to unlawfully dispose of the vehicles. .The vehicles, financed under a commercial equipment loan, had been leased by Gensol to a related group entity which has since ceased operations..Justice Manmeet Pritam Singh Arora, observed that the facts disclosed an urgent risk of asset dissipation and permitted court-appointed receivers to take custody of the vehicles. “The Plaintiff may suffer loss if the possession of the Vehicles is not secured and the Defendant No.1 goes on to dispose of the said Vehicles,” the Court noted. The Court also cited SEBI’s interim findings that company funds had been misused and diverted by Gensol’s promoters in violation of corporate governance norms..Gensol had availed a ₹15 crore equipment term loan from STCI Finance under a loan facility agreement dated October 19, 2023, to acquire 129 electric vehicles for commercial leasing. The loan was secured by a hypothecation deed and personal guarantees from Gensol promoters Puneet Singh Jaggi and Anmol Singh Jaggi. STCI submitted that it disbursed funds directly to vendors after which Gensol leased the vehicles to BluSmart, a related entity that is no longer operational. STCI recalled the loan on April 29, 2025, citing defaults and credit downgrades and claimed dues of ₹11.25 crore. STCI also highlighted the Securities and Exchange Board of India’s (SEBI) April 15 order, which found that the company’s promoters had treated the public company as a “propriety firm” and diverted institutional borrowings.Taking note of the urgency, the Court observed:“The Plaintiff has been able to show that the Defendant No.1 did not adhere to the terms of the Facility Agreement and the financial discipline enumerated therein and committed defaults in re-paying the loan... the Plaintiff may suffer loss if the possession of the Vehicles is not secured and the Defendant No.1 goes on to dispose of the said Vehicles.”The Court was also persuaded by SEBI's interim order dated April 15 of 2025 which had found prima facie violations of corporate governance by Gensol and its promoters.“The company’s funds were routed to related parties and used for unconnected expenses, as if the company’s funds were promoters’ piggybank.” “The diversion of funds... reflects a culture of weak internal control, where even ring-fenced borrowings from institutional creditors were rerouted at the total discretion of the promoters,” the Court noted. In view of these findings and the “imminent risk of dissipation” of the assets, the Court exempted STCI from the requirement of pre-institution mediation under Section 12A of the Commercial Courts Act, 2015..The Court passed a detailed interim order including the following directions:Receivers appointed: Tarang Gupta, Mansi, and Pavitra Kaur were appointed as court receivers to take over the vehicles, make inventories and relocate them to secure locations.Assistance authorised: STCI representatives were permitted to assist receivers in Delhi, Gurugram and Bengaluru. Local police support was also authorised in case of resistance.Preservation of vehicles: Receivers were empowered to take necessary steps, including arranging charging and maintenance, to prevent deterioration.Restraint on defendants: Gensol and the related lease entity were restrained from selling, transferring or creating third-party rights in the vehicles.Fixed deposit status quo: The Court directed ICICI Bank to maintain status quo on a fixed deposit of ₹40.62 lakh, which had been separately hypothecated by Gensol as security for the loan.The Court noted that the depreciated value of the 129 vehicles stood at approximately ₹11.19 crore as on March 31, 2025, and ordered that their possession be secured to mitigate losses..STCI was represented by advocates Tanmay Mehta, Atul Sharma, Abhinav Mukhi, Abhishek Srivastav, Manisha Arora, Shantanu Tomar and Vasu Vats..This is not the first such order against Gensol.On May 7, the Delhi High Court had restrained Gensol and Blu Smart from alienating 220 more vehicles belonging to lessors Smas Auto Leasing and Shefastaq OPC..Last week, the Court appointed a receiver to take deemed custody of 95 electric vehicles leased to BluSmart Cabs by Clime Finance Private Limited, while restraining Gensol from creating third-party rights over the fleet.On April 25, the Court had restrained Gensol and BluSmart from alienating or creating third-party rights over 175 electric vehicles leased to them by Japanese financial services giant Orix.Earlier this month, the Securities and Exchange Board of India (SEBI) issued a show-cause notice to Gensol over alleged violations of corporate governance norms, including failure to disclose related-party transactions, particularly with BluSmart and other group companies..[Read Order]