BharatPe moves to SIAC to enforce ‘claw back’ of Grover’s restricted shares

BharatPe has approached the Singapore International Arbitration Centre (SIAC) seeking to clawback cofounder Ashneer Grover’s restricted shareholding in the company, multiple people aware of the development told ET. This is the third legal action by BharatPe against Grover this week in an ongoing battle where the fintech firm has
also filed a civil suit at the Delhi High Court and a criminal complaint with the Economic Offences Wing (EOW).

In its arbitration plea filed on Thursday, BharatPe has urged the SIAC to transfer Grover’s restricted shares to another cofounder Shashvat Nakrani for a total consideration of Rs 33.02 lakh.

“The company had earlier sent a legal notice for clawback and has now initiated arbitration proceedings,” said one person in the know of the matter.

According to the fintech firm’s articles of association (AOA)—a legal document containing rules for the internal management of a company— if a founder terminates his employment without the consent of the board, the company will buy back the shares held at lower than the fair market value.
The document also states that in case of such a buyback, the restricted shares of the founder could also be transferred to an employee welfare trust at a lower than fair market value or “acquired from the relevant founder in any other manner as the Board deems fit”.

BharatPe’s parent Resilient Innovations had filed the AOA with the Registrar of Companies (RoC) in September 2021.

“It seems that the (BharatPe) board has taken the decision for Shashvat to acquire Grover’s shares,” said a second person cited above.

Grover
currently holds roughly 8.5% stake in BharatPe. Of this 1.4% is not vested, ET had reported earlier on
March 2 stating that BharatPe was looking to claw back Grover’s restricted shares.

Grover and BharatPe did not respond to ET’s queries on the matter until press time on Friday.

The embattled cofounder had resigned from the company and its board on March 1 stating that he had been ‘vilified’ and treated in the ‘most disrespectful manner’

The following day BharatPe alleged that Grover tendered his resignation “after receiving the agenda for an upcoming board meeting that included submission of a report (by consulting firm PwC) regarding his conduct”.

At the end of January this year, BharatPe’s board had
hired independent auditors Alvarez & Marsal (A&M), and PricewaterhouseCoopers (PwC) after receiving complaints from an internal whistle-blower on alleged financial malpractices and corporate misgovernance at the fintech firm

Both parties have since engaged in a fractious and high-decibel legal battle.

In February, Grover had also filed an arbitration plea with the SIAC to stop the probe initiated by BharatPe into alleged financial mismanagement of the company. In his emergency plea, Grover’s counsel argued that the governance review was undertaken in an unfair manner. He had also sought indemnity against any future action. However,
SIAC had refused to grant any emergency relief to Grover in these matters, since the company did not offer “any relief whatsoever” to Grover from internal investigation.

In an
exclusive chat with ET, soon after resigning from BharatPe in March, Grover said that he has “given up a lot”, including management stock options worth Rs 100 crore, in the course of his spat with the company’s board.

“Monetarily I have actually given up close to Rs 100 crore of management stock options that were to be given to me. They have snatched that away from me. They have defrauded Madhuri (Jain) by taking some Rs 12 crore of equity from her,” Grover had said in that interaction with ET.

In a public statement on May 10,
BharatPe had said that it would claw back restricted shares of a ‘former founder’ as per the company’s shareholder agreement. It did not specify which founder it was referring to.

Mounting legal cases

On Thursday, the
Delhi High Court issued summons to Grover along with his wife and former head of controls Madhuri Jain Grover. Grover and Jain’s family members were also made party to the suit filed by the fintech firm. BharatPe has filed a civil suit against the defendants, in addition to a complaint filed with the Economic Offences Wing (EOW) – seeking damages of Rs 88 crore.

In its complaint to the EOW, the fintech company has alleged that the Grovers indulged in practices such as creating fake bills, overcharging for recruitment, and enlisting fictitious vendors to provide services to the company.

This was the first time that BharatPe revealed extensive details about the investigation, which was undertaken against Grover and his family members since the beginning of this year.

Among several allegations, BharatPe accused that a summons was issued in October 2021 to the company by the Directorate General of GST Intelligence (DGGI), Rohtak — to provide evidence and documents pertaining to purchases made from 30 vendors — and was “suppressed from the Board of Directors” by the defendants.

“It has now been learnt that out of this list of thirty (30) GST numbers (vendors) listed in the DGGI summons, correspondences for twenty such vendors were with a single email id,” it added.

Due to these activities, BharatPe said it had to cough up a penalty of Rs 1.66 crore in GST proceedings. Further, it still has not been able to verify the underlying transactions to the tune of Rs 71.76 crore for the over 30 vendors mentioned in the DGGI order.

Additionally, the company has also alleged that the defendants siphoned Rs 7.6 crore from 2018 to 2021 through invoices raised by “bogus HR consultants”.

Separately, in the civil suit, BharatPe accused misappropriation of funds to the tune of Rs 59.73 lakh from the company by Grover and his wife “towards the payment of their personal expenses, such as rent and utilities paid on their personal residence, purchase of home appliances, and purchase of airline tickets for family members, payments towards personal skincare, etc”.