ED Detains BluSmart Co-Founder in FEMA Case

The detention of BluSmart co-founder Puneet Jaggi by the Enforcement Directorate (ED) on April 24, 2025, marks a significant escalation in the ongoing investigation into alleged financial irregularities at Gensol Engineering his EV infrastructure firm. ED raids targeted Gensol’s Delhi, Gurugram, and Ahmedabad offices, seizing crucial documents, electronic devices, and financial records as part of its probe into potential Foreign Exchange Management Act (FEMA) violations. Though Jaggi received interim protection from a Delhi Court on April 30, requiring a 7-day notice before arrest, the investigation continues to intensify.

| ED Detains BluSmart Co-Founder in FEMA Case |

The ED's actions follow the Securities and Exchange Board of India's (SEBI) damning interim order issued on April 15, 2025, which barred Gensol's promoters-Anmol Singh Jaggi and Puneet Singh Jaggi-from participating in securities markets. SEBI's investigation uncovered significant financial mismanagement: the company raised Rs 977.75 crore in loans ostensibly for electric vehicle procurement, yet only Rs 567.73 crore was properly accounted for in this regard. Rs 262.13 crore remains unaccounted for, with a portion reportedly spent on luxury apartments, personal travel, and high-end goods.

Why FEMA Matters Here

Enacted in 1999, the Foreign Exchange Management Act (FEMA) replaced India’s restrictive forex laws with a framework balancing economic growth and compliance. Key provisions in play:

• Section 3: Bans unauthorized forex dealings – critical in cases alleging illicit cross-border fund flows.

• Section 4: Prohibits residents from holding foreign assets without RBI approval, a focus in shell firm probes.

• Section 37: Grants ED powers to search, seize documents, and summon individuals – (exercised in April 24th’s raids.)

• Section 37A: Allows ED to freeze domestic assets equivalent to undisclosed foreign holdings, a likely tool if offshore violations are proven.

FEMA’s reach extends beyond corporates to individuals managing cross-border transactions. With ED increasingly active in forex cases, compliance isn’t optional – structured documentation of overseas investments/remittances is vital. As this case shows, even startups scaling rapidly aren’t immune to scrutiny.

The Gensol case highlights the critical importance of FEMA compliance for all entities engaged in cross-border transactions. As India's economy becomes increasingly integrated with global markets, ED scrutiny of international financial flows has intensified. For rapidly scaling startups and established businesses alike, maintaining transparent documentation of overseas investments and remittances is essential to avoid regulatory complications.

The ongoing investigation demonstrates that even promising ventures in emerging sectors like electric mobility aren't immune to regulatory oversight, particularly when allegations involve sophisticated mechanisms of fund diversion across international boundaries. The detention of Puneet Jaggi by the ED in the FEMA case linked to Gensol Engineering underscores the seriousness with which Indian authorities are treating alleged financial irregularities involving cross-border transactions.

The case has exposed significant gaps in financial management and compliance, leading to regulatory actions by both SEBI and the ED. For companies operating in India’s increasingly globalized economy, strict adherence to FEMA regulations and transparent financial practices are imperative to avoid severe legal consequences. The Gensol investigation is a stark reminder that regulatory compliance is a fundamental pillar for sustainable business growth, particularly in sectors reliant on foreign funding and international partnerships.

Disclaimer: The information presented in this blog does not constitute legal or professional advice. It should not be relied upon for such purposes or used as a substitute for legal advice from an attorney licensed in your state.