Clean those home corners

This week marked the end of a long legal battle between BharatPea rising fintech star valued at $2.7 billion (at its peak), and its co-founder Ashneer Grover. What started in January 2022, when an expletive-laden phone conversation between Grover and a Kotak Mahindra bank official was leaked, quickly turned into one of the ugliest public disputes between a new-age startup backed by blue-chip investors. level and its founder.

Grover and his wife Madhuri Jain were subsequently fired over allegations of embezzlement and failures in corporate governance. The two parties had been embroiled in multiple court cases (civil and criminal) over the past two years.

But on Monday, a settlement was reached in which BharatPe and Grover agreed to drop these multiple charges against each other on the condition that the former CEO renounce his stake in the fintech and disassociate himself from the company in the future. In one fell swoop, this meant that investors lost the opportunity to make this incident an example to deter future cases of corporate governance failures, which have significantly affected the image of India’s emerging economy in the last two years.

Grover from BharatPe and Edtech startup Byju’s They have been the two most high-profile cases in which aggressive solo founders have been involved in protracted litigation fighting shareholders, lenders and law enforcement agencies, even as their startups failed.

‘The investors refused rather than press ahead with the charges. In India, these types of legal cases can last for years, which can continue to affect the value of the company. This is one of the reasons why shareholders have no advantage to continue fighting,” said a founder after the BharatPe news broke on Monday.

Read also | BharatPe vs Ashneer Grover deal: Making sense of the legal battle between the two parties

The truce may have come about in the wake of a possible arrest of Grover’s wife Jain, which pushed the couple to accept the terms of the deal doled out by BharatPe. As an investigation by the Economic Offenses Wing (EOW) continues, the agreement between the two parties once again highlighted the lack of strict punishments for financial fraud and misappropriation of company funds, not only in the startup world, but throughout India Inc.

So what’s the harm? Since he resigned from an operational role at BharatPe in March 2022Grover has built a brand through social media, podcasts, the reality show ‘Shark Tank,’ and speaking and speaking at campuses across the country. The direct relationship he has built on social media channels with his viewers has helped him create a very different narrative than what you will see in mainstream business media.

Posting selfies from the courtroom, establishing partnerships with streaming platforms, and detailing your “difficult” business journey is a way to demonstrate how you have stood up to your shareholders and investors for the good of the company. Grover’s fans appreciate his bold and direct style. But the real question is: to what extent are they aware that he is embroiled in a plethora of financial fraud allegations that, ideally, should not make him a “model businessman”?

On the contrary, the global tech world has seen big names like Sam Bankman-Fried, founder of FTX and Elizabeth Holmes, founder of Theranos being sentenced to very long prison terms for committing financial fraud and defrauding investors.

Venture investors say filing criminal cases and pursuing them in India is a painstaking and extremely time-consuming affair. But with each case in which an out-of-court or private settlement is reached, many new ones can arise.

What is even more problematic is that some founders who have faced scrutiny for their alleged involvement in corporate governance failures have re-emerged and raised new capital that tarnishes the industry’s overall reputation. The fear then is that the new-age tech ecosystem that was expected to stand out as different from the old guard has begun to suffer from the same gaps that have existed for decades in corporate India. Surely that rot should not be allowed to seep in.