The year 2017 was a turbulent one for the startup ecosystem, which had its fair share of controversies. It started with the shutdown of homestay startup Stayzilla and the ugly turn it took. There were founder spats, non-payment of dues and an instance of cheating. This brought about several discussions on the need for better regulation and insolvency policies for startups.
Here’s a lowdown of five startups and entrepreneurs, who made news for all the wrong reasons.
Stayzilla
This was perhaps the most long-drawn and talked about controversy of 2017.
Stayzilla, a homestay aggregator, suspended operations on February 24, stating that it will restructure itself and reboot operations. This caused one of its vendors Jig Saw Solutions to fear non-payment of dues and file a criminal case against co-founder and CEO Yogendra Vasupal and CFO Sachit Singhi.
Aditya CS of Jig Saw claimed that the company did not pay him his dues to the tune of Rs 1.7 crore since January 2016, which led to the dramatic arrest of Vasupal on March 14.
Interestingly, the night before his arrest, Vasupal had put out a blog saying he was being harassed by his landlord and by Jig Saw Solutions. Voodoo dolls were allegedly sent to the CFO Singhi’s house to intimidate him.
Most entrepreneurs and people from the startup ecosystem came forward in support of Vasupal, even writing to the central government to intervene.
Aditya then went on to file an insolvency suit against Stayzilla at the National Company Law Tribunal (NCLT), Chennai, which in September, ordered Stayzilla to pay the outstanding dues to JigSaw Advertising and Solutions. The Tribunal ruled that based on the facts and circumstances of the case and the submissions made by both the counsels, Stayzilla had defaulted on payment of the outstanding debt to JigSaw, along with interest. The court ordered commencement of the Corporate Insolvency Resolution process.
On December 23, the Madras High Court stayed all further proceedings against Stayzilla over the initial fraud case that got Vasupal arrested. Following a plea by the founders to quash the case, which was pending in a special court of the central crime branch, Stayzilla has been granted interim relief till January 22.
Shopclues Founder Spat
In March, Shopclues co-founder Sandeep Aggarwal, who was then managing his next startup Droom, publicly accused his wife and co-founder Radhika Aggarwal of attempting to push him out of the company and of faking her qualifications and experience in running the startup.
Sandeep took to Facebook to make accusations against Radhika Aggarwal and co-founder Sanjay Sethi. He claimed that his voting rights in Shopclues were fraudulently changed to deliberately kick him out. There were indications of personal problems as well.
However, there was a lot more to the story than what Sandeep claimed.
Two days after he made the accusations, the board of ShopClues issued a statement criticising Sandeep for engaging in personal vendetta on a public forum. Claiming that it was proud of Radhika’s contribution to the growth of Shopclues, the company said it has dissociated Sandeep for his criminal wrongdoings.
It listed a series of events as proof that post his arrest, Sandeep had no say in the company.
Sandeep was arrested by the FBI in California on July 29, 2013 for conspiracy to commit securities fraud and wire fraud. Following this, Sanjay Sethi was appointed as CEO and Radhika was brought on board, while Sandeep resigned and became a consultant to ShopClues.
Besides other things, it was agreed that if Sandeep pledged guilty or was convicted for the alleged crimes, he will cease to be a consultant and will no longer have any operating role in ShopClues. This was unanimously approved by the board and signed by Sandeep and the company.
One month later, Sandeep pledged guilty to one count of securities fraud and one count of conspiracy to commit securities fraud. Automatically, as per the agreement, Sandeep’s association with the company was terminated.
But despite signing such an agreement, the board claimed that Sandeep tried to reclaim his position at least 2-3 times, attempting to challenge the contract.
In September, Sandeep Aggarwal filed an FIR against Sanjay Sethi and Radhika in Delhi High Court alleging forgery and cheating and of undermining his contribution to the growth of the firm. However, within two days, Delhi HC passed an order forbidding any coercive action against Radhika and Sanjay Sethi.
Snapdeal-Gojavas Legal Tussle
It’s been a rough year for Snapdeal; from laying off most of its employees, to cutting down office space and a failed deal with Flipkart.
And amidst all of this came the legal tussle with Quickdel Logistics, the parent company of e-commerce logistics entity GoJavas.
On June 23, Snapdeal registered an FIR against former senior executives of Quickdel with the Economic Offences Wing of Delhi Police, for cheating, forgery, conspiracy, criminal breach of trust and criminal misappropriation of funds.
Naming former executive director of Quickdel Logistics Abhijeet Singh and promoters Praveen Sinha, Randhir Singh and Ashish Chaudhary as the main accused, Snapdeal had filed a complaint in 2016 with the Delhi Police, following which an FIR was registered in June.
Based on some inspection of GoJavas’ accounts from January 2015 to March 2015, Snapdeal found illegal, inflated and excess payments to non-existent persons.
Snapdeal owned 49% in GoJavas, which Anand Rai bought in a fire sale and merged it with his logistics business Pigeon Express.
Things turned ugly after Quickdel sent a Rs 300-crore legal notice to the founders of Snapdeal, Kunal Bahl and Rohit Bansal and to Snapdeal’s parent Jasper Infotech.
Anand Rai alleged that Snapdeal stole confidential business information from GoJavas and stopped doing business with it for the benefit of its own logistics arm Vulcan Express. There were also allegations of Snapdeal stealing employee and service vendor data from GoJavas and of Jasper Infotech siphoning off money from GoJavas to Vulcan Express.
While Jasper called these allegations baseless, in October, Quickdel filed a fresh complaint against Jasper, promoters Kunal Bahl and Rohit Bansal and Vulcan Express. Anand filed a complaint with Delhi Police's Economic Offences Wing (EOW) alleging criminal breach of trust, cheating, intellectual property theft, theft of trade secrets and data and misappropriation of funds, among others.
Swiggy Leaks
One of the most successful foodtech startups Swiggy, was also embroiled in a major row.
Four people, claiming to be ex-employees of Swiggy anonymously wrote a Tumblr Blog in July alleging that the growth story of Swiggy is a farce.
The post alleged mismanagement at Swiggy, claiming that the startup is cheating its restaurant partners, customers and investors.
In terms of cheating restaurants, the post claimed that Swiggy looks to arm-twist restaurants to increase their commissions and was looking to further increase it and that employees were made to lie to restaurants about market share.
It claimed that it cheated users by planting good reviews for Swiggy and hiding bad ones. It also alleged that investors are lied to, in terms of volumes shown and that the numbers shown by media are all inflated and do not reflect the reality at Swiggy.
There were also allegations of questionable office culture and of employees, including delivery boys, being treated badly/unfairly.
However, Swiggy refuted all these allegations claiming that the blog was aimed at maligning its reputation.
Swiggy claimed that the article contained inaccurate facts regarding business and order numbers.
Later, Swiggy’s co-founder and CEO Sriharsha Majety gave a detailed response refuting all claims with a point-by-point explanation on every allegation made.
While hinting that the blog wasn’t written by former employees, he refuted allegations of inflated numbers stating that the actual numbers were verified by external auditors, and also pointed to a mismatch in the numbers mentioned in the anonymous blog.
Eat, Shop, Love
There were allegations of non-payment of dues and siphoning off of funds, but this incident of outright cheating, had everyone’s attention.
In October, Oindrilla Dasgupta, co-founder of Eat, Shop Love, was arrested by the Cyber Crime police in New Delhi for allegedly duping several businessmen and companies across the country, of several lakh rupees.
A former resident of Bengaluru, she was accused of cheating at least eight people in seven months, including investors and travel agents.
Police said that they had received four complaints against her since March.
One of the complainants was Ashok Kinha, who runs an investment firm. He alleged that Oindrilla contacted him and claimed to be the owner of a startup, which was looking to invest Rs 20 crore in his business. Kinha agreed to the proposal for which the accused issued a post-dated cheque of Rs. 4.3 crore. Post this, she asked Kinha for Rs 58 lakh in financial aid to help with her husband’s cancer treatment.
Interestingly, her husband himself had filed a police complaint against her for misusing his bank accounts. However, Kinha claims that her husband too was involved in the crimes committed by Oindrilla. Cyber Crime police said that Oindrilla and her husband had separated a few years ago.
According to media reports, Oindrilla was arrested in Delhi in an unrelated case, after which Cyber Crime police arrested her for the frauds committed in Bengaluru.