Corporate Law Newsletter: April 2025

We extend a warm welcome to our esteemed readers as we present our newsletter. In this edition, we shed light on the latest developments in India’s corporate legal sphere for March & April 2025. We are thrilled to bring you varied news and insights, encompassing regulatory advancements to keep you up to date. From recent updates & deals to court decisions, we have got all the news you need to stay ahead in the corporate legal landscape.

So, sit back, enjoy your favorite beverage, and dive into the latest developments in India’s corporate legal landscape.

ARTICLE

COLLATERAL DAMAGE: BLUSMART’S SHUTDOWN IN THE WAKE OF GENSOL’S GOVERNANCE CRISIS – A CASE STUDY IN CORPORATE GOVERNANCE AND WATERFALL EFFECTS

The recent interim order by the Securities and Exchange Board of India (“SEBI”) against the promoters of Gensol Engineering Ltd. has sent shockwaves through the Indian electric vehicle (EV) ecosystem. More than just a regulatory slap on the wrist for alleged financial impropriety of the promoters of Gensol; Anmol Singh Jaggi and Puneet Singh Jaggi, SEBI’s action has triggered a stark “waterfall effect”, leading to the temporary suspension of operations by BluSmart, a prominent EV ride-hailing service co-founded by the same individuals. This incident, bearing a stark resemblance to the fallout from the WeWork-SoftBank entanglement (where blurred boundaries between parent and affiliate entities magnified the fallout of leadership misconduct), serves as a potent reminder of the intricate relationships within corporate structures and the far-reaching consequences of misconduct at the helm of a listed entity, particularly concerning related party transactions and the fate of affiliate companies.

The Genesis of the Storm: SEBI’s Findings Against Gensol’s Captains

SEBI’s interim order, dated April 15, 2025, paints a concerning picture of corporate governance breakdown at Gensol Engineering. SEBI’s preliminary investigation reportedly unearthed evidence of fund diversion by promoters Anmol Singh Jaggi and Puneet Singh Jaggi. These funds, ostensibly meant for the procurement of electric vehicles for BluSmart, were allegedly utilized for personal enrichment, including the acquisition of a luxury apartment in Gurugram, Haryana.

This alleged misdemeanour at the level of a listed entity’s promoters raises serious questions about fiduciary responsibility and the sanctity of funds raised from public markets. SEBI’s swift action, restraining the Jaggi brothers from the securities market and key managerial roles within Gensol, underscores the regulator’s commitment to safeguarding investor interests and maintaining the integrity of the capital markets.

The Ripple Effect: BluSmart Grinds to a Halt

The immediate and visible fallout of SEBI’s order has been the temporary suspension of BluSmart’s ride-hailing services across major Indian cities – Delhi-NCR, Bengaluru, and Mumbai. This operational halt highlights the direct and often precarious link between a listed parent/affiliate company and its related entities, especially when key personnel and financial flows are intertwined.

BluSmart’s reliance on Gensol for EV procurement, a fact alluded to in SEBI’s findings, underscores the potential vulnerabilities inherent in related party transactions. While such transactions are not inherently illegal, they demand the highest levels of transparency and adherence to arm’s length principles to prevent misuse of funds and conflicts of interest. The current situation suggests a potential failure in these safeguards, leading to a crisis that has now engulfed BluSmart’s operations and inconvenienced its users.

Related Party Transactions Under Scrutiny: A Regulatory Tightrope

BluSmart and Gensol, though separate legal entities, share promoters and operational linkages — especially in EV procurement. The Gensol-BluSmart saga throws a spotlight on the critical importance of regulatory oversight of related party transactions. SEBI has stringent norms in place to ensure that such dealings do not prejudice the interests of minority shareholders in listed companies. SEBI’s current regulatory framework mandates:

• Prior approval of all Related Party Transactions (“RPTs”) (and subsequent material modifications) by the audit committee and the board.
• Shareholder approval, where thresholds under Regulation 23 of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 are met.
• Comprehensive disclosure in financial statements and board reports.

The alleged diversion of funds intended for BluSmart, if proven, would represent a clear violation of these principles. It underscores the need for robust internal controls within listed entities to monitor the end-use of funds and prevent their siphoning off, particularly when routed through affiliate companies via related party transactions.

The “Waterfall Effect”: Understanding the Contagion

The suspension of BluSmart’s operations perfectly illustrates the “waterfall effect” in corporate ecosystems. Misconduct at the top of a listed entity can have cascading consequences down the organizational structure, impacting:

• Regulatory Scrutiny: The incident is likely to trigger increased scrutiny from regulatory bodies, not just on Gensol but also on the operational and financial linkages between listed companies and their unlisted affiliates.
• Operational Viability: As seen with BluSmart, the financial health and operational capabilities of affiliate companies heavily reliant on the listed entity can be severely compromised.
• Investor Confidence: The reputational damage stemming from the promoter’s alleged misdemeanour can erode investor trust not only in Gensol but also in any associated entities like BluSmart, potentially impacting future funding and valuations.
• Stakeholder Interests: Employees, customers, and other stakeholders of the affected affiliate companies also bear the brunt of the misconduct. BluSmart’s drivers face uncertainty, and its users are left without a previously reliable service.

The Path Forward: Lessons in Governance and Transparency

The Gensol-BluSmart episode serves as a crucial learning point for corporate India. It highlights the following:

• The Indispensability of Strong Corporate Governance: Robust internal controls, independent oversight, and a culture of ethical conduct are paramount in preventing promoter misconduct and safeguarding stakeholder interests.
• The Need for Diligent Due Diligence: Investors and other stakeholders must conduct thorough due diligence, not just on the listed entity but also on its related parties and the nature of their transactions.
• Enhanced Regulatory Vigilance: Regulatory bodies like SEBI must remain vigilant in monitoring related party transactions and enforcing compliance to prevent the erosion of investor confidence.
• Transparency and Accountability: Listed companies must ensure transparent disclosure of related party transactions and hold promoters and key management accountable for any breaches of trust.

Key Takeaways for Corporate Legal and Compliance Professionals

1. Vigilance in Related Party Transactions: All RPTs must be not only legally compliant but demonstrably fair and in the company’s best interest.
2. Promoter Conduct Is Under the Microscope: Founders of listed entities are fiduciaries — their actions, especially involving capital market transactions, are subject to heightened scrutiny.
3. Disclosures Must Match Deeds: Misrepresentation or opaque fund use can trigger regulatory, civil, and criminal consequences.
4. Enterprise-Wide Governance: Compliance for interconnected entities cannot be done in mutual isolation. Where entities are financially or operationally intertwined, a unified governance protocol is essential.
5. Early Risk Detection: Internal audit functions must be empowered to raise red flags and trigger board-level intervention when needed.

Conclusion:

The unfolding situation with Gensol and BluSmart is a stark reminder that the actions of those at the helm of listed companies can have far-reaching and detrimental consequences for their entire corporate ecosystem. The alleged misdemeanour of the founders has triggered a “waterfall effect,” demonstrating the vulnerabilities inherent in complex corporate structures and the critical need for robust governance frameworks and transparent related party dealings. As SEBI’s investigation progresses, the lessons learned from this episode will undoubtedly shape the future discourse on corporate accountability and the interconnectedness of entities within the Indian business landscape. The fate of BluSmart now hangs in the balance, a direct casualty of the alleged missteps at its listed sister concern.

DEAL TRACKER

1. The Competition Commission of India (“CCI”) has approved Tata Sons Private Limited’s (“Tata Sons”) acquisition of an additional 10% stake in Tata Play Limited from Baytree Investments (Mauritius) Pte Ltd. Tata Sons is a core investment holding company, registered with the Reserve Bank of India (“RBI”) and classified as a Systemically Important Non-Deposit Taking Core Investment Company. Tata Play, formerly Tata Sky, is a leading content distribution platform in India, offering Direct-to-Home (DTH) television services and a wide range of Over-the-Top (OTT) content.
2. The CCI has approved the acquisition of 100% equity share capital of Ayana Renewable Power Private Limited by ONGC NTPC Green Private Limited (“ONGC NTPC”). ONGC NTPC is a joint venture between ONGC Green Limited and NTPC Green Energy Limited, both wholly owned subsidiaries of Oil and Natural Gas Corporation Limited (ONGC) and NTPC Limited, respectively. ONGC NTPC is currently not engaged in any business activities. As per CCI, Ayana Renewable Power, along with its affiliates, operates in the power sector in India, focusing on renewable energy generation and power transmission. 
3. Rimigo, a travel-tech startup, has raised $550,000 in a pre-seed funding round co-led by Reazon Capital (Japan) and SGgrow Capital, with participation from Indian angel investors including S Ramadorai and Ravi Nigam. Rimigo, founded in 2024 by Sahil Sharma, Shubham Chintalwar, and Aditya Shirole, offers an AI-powered platform that simplifies international travel planning by generating personalized itineraries, flight suggestions, and curated stays and experiences. The funds raised will be used to advance product development and grow its team.
4. Direct-to-consumer luggage brand Uppercase has raised an undisclosed investment from Indian cricketer Jasprit Bumrah, who has been associated with the brand as its ambassador since inception. This strategic partnership marks a deeper collaboration between the ace fast bowler and the Mumbai-based travel gear company.

DEAL FOCUS

Minimalist Joins the HUL Family: A Bold Step into the Future of Evidence-Based Skincare 

In a bold move that underscores its commitment to driving innovation and staying ahead of consumer trends, Hindustan Unilever Limited (“HUL”) has signed a definitive agreement(s) to acquire a 90.5% stake in Uprising Science Private Limited (“Uprising Science”), a company of the rapidly growing beauty brand Minimalist (“Transaction”). The Transaction received regulatory clearance from the CCI on March 17, 2025, and was successfully completed on April 21, 2025. This acquisition marks a significant milestone in HUL’s strategic journey to transform its beauty and wellbeing portfolio by entering high-growth, science-backed personal care segments. Uprising Science is engaged in the business of haircare and skincare products under the brand name “Minimalist”. It primary sells its products in India and has grown into a prominent digital-first brand known for its transparent, evidence-based skincare and haircare products, underpinned by the philosophy to #HideNothing.

A Peek into the Transaction

The Transaction involves a combination of primary capital infusion and secondary share buyouts, resulting in HUL acquiring a controlling 90.5% stake in Uprising Science. HUL has paid a cash consideration of INR 2,670 crores to the shareholders of Uprising Science at a pre-money enterprise valuation of INR 2,955 crores (subject to adjustments as set out in the Share Purchase and Subscription Agreement), along with a primary infusion of INR 45 crores to acquire 90.5% shareholding in Uprising Science. The agreement also provides HUL with a clear path to acquiring the remaining 9.5% shareholding within the next two years from the completion date of the terms as set out in Share Purchase and Subscription Agreement. The founders, Mohit and Rahul Yadav, will continue to lead the brand’s operations in collaboration with HUL, ensuring continuity in Minimalist’s unique brand ethos and deep consumer connect. The Transaction brings Minimalist into HUL’s Beauty & Wellbeing division, led by Executive Director Mr. Harman Dhillon. With this acquisition, Minimalist joins HUL’s portfolio of trusted brands, poised to leverage the company’s resources, expertise, and extensive global reach.

How this Transaction Benefits HUL

This acquisition offers multiple strategic advantages for HUL. At its core, Minimalist brings with it a differentiated value proposition, clinically efficacious brand that has resonated deeply with young, digital-savvy Indian consumers. With a fast-growing direct-to-consumer (D2C) model and an annual revenue run rate exceeding ₹500 crore, Minimalist provides HUL access to a vibrant channel of consumer engagement that enables faster innovation, feedback, and responsiveness to market needs. The brand’s evidence-based product development aligns seamlessly with HUL’s research-led innovation approach and enhances its credibility in the premium personal care space.

Beyond the portfolio fit, Minimalist’s strong online presence and increasing offline footprint across platforms like Nykaa, Apollo Pharmacy and other modern retail partners add strategic value to HUL’s ambitions. With this deal, HUL is well-positioned to drive profitable growth in a segment where consumer expectations are shifting toward minimal, effective, and honest formulations.

The Road Ahead

The journey ahead promises significant growth and innovation. One of HUL’s primary goals post-acquisition will be to scale Minimalist’s reach by expanding its presence across digital platforms, general trade, and modern retail outlets. With the support of HUL’s unparalleled distribution network and supply chain capabilities, Minimalist is expected to grow swiftly within India and prepare for potential international rollouts. The Minimalist will also integrate into HUL’s robust R&D ecosystem, which spans key research centers in Mumbai, Bangalore, and Gurgaon, and focuses on cutting-edge science including dermatology, biosciences, and sustainable product development. As consumer demand increasingly favors brands that deliver efficacy with transparency, HUL and Minimalist together are well-placed to lead this next phase of transformation in the beauty landscape.

Conclusion

HUL’s acquisition of Minimalist marks more than just a business deal, it signifies the company’s future-focused approach to personal care, grounded in science, innovation, and digital-first thinking. With Minimalist, HUL is not only strengthening its portfolio but also embracing a philosophy that mirrors the new expectations of consumers: transparency, authenticity, and efficacy. This acquisition will enable HUL to deliver more targeted, evidence-based beauty solutions while enhancing its relevance in an increasingly competitive market. As HUL continues to build a modern, science-led personal care ecosystem, Minimalist stands out as a powerful growth engine and a testament to the company’s evolving vision.

CAPITAL MARKETS

1. Draft Red Herring Prospectus issued for Excelsoft Technologies Limited

The Draft Red Herring Prospectus (“DRHP”) for Excelsoft Technologies Limited outlines its proposed Initial Public Offering (“IPO”) of equity shares. Excelsoft Technologies Limited (“Excelsoft”) is a global vertical Software as a Service company focused on the learning and assessment market. Excelsoft offers technology-based solutions across diverse educational segments through long-term contracts with enterprise clients worldwide. The offer has been made under Regulation 6(1) of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (“ICDR Regulations”) through the book-building process.

2. Draft Red Herring Prospectus issued for Allchem Lifescience Limited

The DRHP for Allchem Lifescience Limited (“Allchem”) sets out the details of its proposed IPO, comprising a fresh issue of equity shares. Allchem is an Indian manufacturer engaged in the production of Active Pharmaceutical Ingredient (API) intermediates, specialty chemicals, and custom synthesis, with capabilities in contract development and manufacturing. The offering has been made pursuant to Regulation 6(1) of the ICDR Regulations and shall be conducted via the book-building process. 

3. SEBI Partners with DigiLocker to Reduce Unclaimed Securities

SEBI has partnered with DigiLocker to enhance access to financial asset information and reduce unclaimed securities. Through this initiative, investors may store demat and mutual fund statements, including their Consolidated Account Statement (CAS), in DigiLocker. This collaboration aims to improve investor protection and ensure easier identification of unclaimed assets.

4. SEBI Warns Unregistered Entities for Investment Advisory Violations

On March 27, 2025, SEBI has issued a warning to M/s. Smart Investment Services and M/s. 7 Investment Services, for offering unregistered investment advisory services in violation of the Securities and Exchange Board of India Act, 1992 and the related regulations. The said entities have been cautioned to cease such activities and comply with regulatory requirements, failing which SEBI may initiate appropriate legal action. 

5. Interpretive Guidance on Compliance Officer’s Position under Regulation 6(1) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR Regulations”)

A SEBI letter dated April 03, 2025, addressed DCB Bank’s request for informal guidance regarding the eligibility of its current Compliance Officer under Regulation 6(1) of the LODR Regulations, as amended. SEBI clarified that the term ‘one level below the Board of Directors,’ as per the amended LODR Regulations and SEBI’s circular dated April 01, 2025, refers to a Compliance Officer who is hierarchically positioned directly under the Managing Director or Whole-time Director(s). Consequently, SEBI advised that for regulatory compliance, DCB Bank must ensure its Compliance Officer is aligned with this organizational requirement.

SIGNIFICANT REGULATORY UPDATES

For the month of March:

1. Approval of Acquisition of Shareholding of Orient Cement Limited by Ambuja Cements Limited dated March 04, 2025

CCI has approved Ambuja Cements Limited’s proposed acquisition of up to 72.8% (Seventy Two point Eight Percent) stake in Orient Cement Limited through a 2 (two) step transaction involving promoter and public share purchases followed by an open offer, in compliance with SEBI Takeover Regulations.

2. CCI (Conduct) Rules, 2025 dated March 07, 2025

CCI issued the draft Competition Commission of India (Conduct) Rules, 2025, inviting stakeholder feedback by April 06, 2025, to enhance confidentiality and ethical standards in handling sensitive information and strengthen vigilance administration.

3. Disclosure of Holding of Specified Securities in Dematerialized Form dated March 20, 2025

SEBI has revised the shareholding disclosure formats effective from the quarter ending June 30, 2025, to enhance transparency and clarity under the holding of specified securities.

For the month of April:

1. Department for Promotion of Industry and Internal Trade (“DPIIT”) Revises Eligibility Criteria for Industrial Entrepreneur Memorandum (“IEM”) Acknowledgment dated April 02, 2025

DPIIT, via Press Note 1, revised the eligibility criteria for IEM acknowledgment, modifying investment and turnover thresholds, to promote large-scale industrial growth in line with updated Micro, Small, and Medium Enterprise (MSME) thresholds.

2. Amendment to the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 dated April 04, 2025

MCA, via draft amendment has proposed to expand the scope of fast-track mergers under Section 233 of the Companies Act, 2013 by amending Rule 25 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016.

3. The Boilers Act, 2025 dated April 04, 2025

DPIIT issued the Boilers Act, 2025, repealing the previously issued Boilers Act, 1923, to modernize and harmonize regulations on boiler safety, inspection, certification, and operational standards across India, with expanded oversight, penalties, and transitional continuity.

4. DPIIT Clarifies Permissibility of Bonus Shares in Foreign Direct Investment (“FDI”) Prohibited Sectors dated April 07, 2025 

DPIIT, via Press Note No. 2 (2025 Series), has clarified that Indian companies, in FDI-prohibited sectors, may issue bonus shares to existing non-resident shareholders, provided such issuance does not alter the existing shareholding pattern.

5. IFSCA (Know Your Customer Registration Agency) Regulations, 2025 dated April 11, 2025

International Financial Services Centres Authority (“IFSCA”) issued the IFSCA (Know Your Customer Registration Agency) Regulations, 2025 to streamline and regulate the centralized Know Your Customer process within IFSCs, focusing on compliance with international Anti Money Laundering (AML)/ Combating Financing of Terrorism (CFT) standards.

6. IFSCA (Capital Market Intermediaries) Regulations, 2025 dated April 11, 2025

IFSCA has notified the IFSCA (Capital Market Intermediaries) Regulations, 2025 to establish a comprehensive framework for registration, regulation, and supervision of capital market intermediaries, aimed at ensuring market integrity and investor protection.

DISCLAIMER

The content provided in this newsletter is intended for general awareness and should not be considered as legal advice. Readers are advised to consult with a qualified legal professional regarding any specific issues mentioned herein. If you have any questions about any of these developments or would like to see something different next month, reach out to us at knowledge@sarthaklaw.com.

We will be back next month with another update. Thank you for reading!