BluSmart, which had leased more than 4,000 electric cars from Gensol—over half its overall fleet—is trying to ensure that Gensol does not reassign the leases unilaterally to other ride-hailing companies. Such a move, its resolution professional said, could jeopardise BluSmart’s bankruptcy resolution process.

In July, Gensol’s interim resolution professional (IRP) issued an advertisement inviting bids to lease 4,000 cars to companies for monthly leases. Gensol had purchased these EVs with loans from state-run financiers including PFC and Indian Renewable Energy Development Agency Limited (Ireda).

“We have raised the issue to Gensol’s committee of creditors (CoC) through the RP that 4,000 cabs should not be leased to other companies directly,” Ritesh Kumar Adatiya, director at NPV Insolvency Professionals Private Limited, the IRP appointed by the NCLT’s Ahmedabad bench, told Mint.

“The advertisement that was put out suggested that the lease of BluSmart was cancelled unilaterally, which should not happen as it will reduce the chance of the resolution process,” he added.

Given that BluSmart gets most of its valuation from its ride hailing operations and its ability to deploy leased cars, any reassignment of the fleet would leave the company with little more than its technology platform.

Gensol’s attempt to lease out the cars to other companies adds to the complications flagged earlier by BluSmart Mobility’s IRP about the startup’s corporate structure.

According to Adatiya, the holding company BluSmart Mobility has four subsidiary companies—BluSmart Mobility Tech Pvt. Ltd (for technology development), BluSmart Charge Pvt. Ltd (EV charging infrastructure), BluSmart Fleet Pvt. Ltd (fleet leasing) and BluSmart Premium Fleet Pvt. Ltd (premium cab services).

Most of the leasing agreements of cars were signed by subsidiary BluSmart Fleet Pvt Ltd. But with only the holding company admitted into insolvency, the IRP has no direct say over the assets housed within its subsidiaries.

Queries sent to Keshav Khaneja, the IRP of Gensol, did not elicit a response till press time.

Legal experts suggest that with both lessor and lessee under insolvency, the resolution process has become significantly more complex. Gensol was admitted into insolvency in June, and BluSmart followed in July.

“There is a provision in the IBC which allows the lessee, BluSmart in this case, to stop Gensol’s attempts to lease assets which have already been leased to BluSmart. That means BluSmart’s resolution professionals can take steps to prevent Gensol’s attempt to monetise its assets,” said Abhirup Dasgupta, partner at HSA Advocates.

“But there is a catch. The lease only stands with the original lessee if they are able to make payments on time, which may be a difficulty as BluSmart itself is also facing insolvency proceedings,” he added.

Lawyers also add that once a company enters the bankruptcy process, there is a halt on any transfer or sales of assets.

“The fact that both entities are under the control of their respective RPs and subject to the moratorium under Section 14 of the Insolvency and Bankruptcy Code (IBC) creates a legal gridlock,” said Vishal Gehrana, partner designate at Karanjawala & Co. and advocate-on-record at the Supreme Court. “The moratorium prohibits the transfer, alienation, or disposal of assets of the corporate debtor and also restricts the termination or suspension of essential contracts.”

The background

BluSmart had leased about 4,700 cars from Gensol, which comprised over 50% of its overall fleet in the country. Since BluSmart halted operations in April after a Sebi order against founders Anmol and Puneet Singh Jaggi, the fleet of the company has been lying idle.

Blusmart’s other leasing partners and lenders, who leased about 4,000 cars, have already looked for other partners to lease their vehicles as the company is not able to pay its leases on time. Other ride hailing companies like Evera Cabs have signed deals with BluSmart’s earlier lessors and taken nearly 500 of its cabs since the company halted operations.

But the cars owned by Gensol, which were bought using ₹663 crore of loans from PFC and Ireda, are still lying idle. The all-EV fleet is quickly losing its value given the fact that electric vehicles tend to lose their resale value fast.

“We agree that these cars need to be put on roads soon as they are losing value. About 2,100 cars have been refurbished and are ready to ply on roads but the issue of leasing should be resolved in a way which should not hamper the chances of resolution process,” Adatiya said.

Apart from Gensol, Axis Bank, HDFC Bank, Mahindra Finance’s Quiklyz, Tata Motors Finance and Kotak Mahindra Bank are among the institutions BluSmart signed leasing agreements with to run its operations.

It also worked with financing firms like Orix, Clime Finance, SMAS Auto Leasing India and Shefasteq OPC, which have since sued the company.