Info Edge accuses 4B Networks and Rahul Yadav of undertaking ‘suspicious transactions’ with a company allegedly started by an associate

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Info Edge, the largest shareholder of  4B Networks Ltd, has accused the company and its founder Rahul Yadav, of undertaking ‘suspicious transactions’ with 4B Realtech Pvt Ltd, a company allegedly started by an associate of Yadav.

In a complaint to the Economic Offences Wing (EOW) of Mumbai Police on August 22, Info Edge has said that 4B Networks advanced a Rs 10 crore loan to  4B Realtech. It has claimed that this money was subsequently transferred to close associates of Yadav.

“The complainant has reasons to believe that a substantial amount from such loan was transferred by 4B Realtech to Aceuser, a company in which Yadav’s wife is a majority shareholder. The complainant company (Info Edge) believes that such transactions were made with a view to moving money from 4B Networks,” Info Edge says in the complaint, a copy of which has been seen by Moneycontrol.

Sanjiv Bhikchandani led Info Edge had invested a total of Rs 288 crore in 4B Networks in multiple tranches since early 2021. It wrote off its entire investment in February this year while announcing the third quarter results of FY23.

Moneycontrol has seen copies of 4B Realtech account statements with ICICI Bank and Axis Bank that were accessed through a whistleblower. These account statements for the second half of 2022 and for 2023 show that 4B Realtech, which was started in July 2022, received up to Rs 10 crore in deposits since last year, according to Info Edge complaint. While these were from multiple accounts, the large deposits were mostly from 4B Networks.

The money deposited to these accounts was immediately withdrawn or transferred to entities and individuals associated closely with Yadav, as per the Info Edge complaint. These include a former colleague of Yadav at 4B Networks. Another key beneficiary is a Noida-based company called Aceuser, where Yadav's wife Karishma Singh is a majority shareholder, the complaint alleges. According to the private company database platform Tofler, Singh is not a director at Aceuser at the moment.

The EOW complaint alleges that during the period between December 2022 to January 2023, 4B Networks gave a Rs 10 crore loan to 4B Realtech, a part of which went to Aceuser and the rest to others connected to Yadav.

Both Info Edge and Rahul Yadav did not respond to Moneycontrol queries citing an ongoing arbitration between both parties at the Delhi High Court.

More transactions under the scanner

In addition to the 4B Networks – 4B Realtech transaction, Info Edge has flagged more suspicious transactions involving 4B Networks, Yadav, and others in its complaint. It claimed that RY Advisory, a company in which Yadav was a director and a 50 per cent shareholder, was a beneficiary of one such transaction.

“The Accused number 1 (Yadav) deceived the complainant company (Allcheckdeals India Pvt Ltd-a wholly owned subsidiary of Info Edge) by making false and incorrect representations and induced it to invest and lend substantial amount aggregating to Rs 288 crore by way of the above mentioned illegal and circuitous transactions… took away the money so invested for personal gain/use thereby causing wrongful loss to the complainant,” Info Edge says in the EOW complaint.

A person close to Yadav refuted these allegations. He told Moneycontrol that entities such as Aceuser and RY Advisory were founded a long time ago, and Yadav no longer had any relationship with them. However, the private company information portal Tofler still lists Yadav as a director at RY Advisory. This person said the plan was to transfer employees from 4B Networks to 4B Realtech to reduce the former’s expenses and the money was transferred to pay for their salaries as well as vendor dues.

“4B Realtech was set up to do invoice financing through a non-banking financial company licence. The plan subsequently got changed and it did not do any business until Info Edge approved it to be run as a separate business to absorb 4B Networks’ employees,” this person said on condition of anonymity.

He further added that all plans were disrupted after Info Edge blocked further funding to 4B Networks following last year’s funding winter despite the initial promise to continue supporting the company for four years.

This person said all payments made by 4B Realtech were in order and made to vendors for their services.  He said that none of these companies named in the complaint – Aceuser and RY Advisory – worked with 4B Networks and did not receive money directly from Info Edge, the allegations in the complaint do not stand. However, the person did not explain why these funds were not used for paying the transferred employees’ salaries.

A person familiar with the situation said said Info Edge first learnt about 4B Realtech and the funds transferred to it when 4B Networks' auditor Deloitte flagged these transactions. “When  Info Edge asked Yadav about 4B Realtech, his explanation was that all the employees of 4B Networks could be transferred to this new entity (4B Realtech), which was running the home loans segment for 4B Networks. This, Yadav said, would help 4B Networks to survive, considering the minuscule revenue it had,” this person said.

Info Edge’s pain continues

Info Edge, which among other things operates the Naukri.com jobs portal, suffered a total loss of Rs 532 crore from writing off its investment in 4B Networks, the company disclosed in a note to investors during the quarterly results announcement on November 7.

While Info Edge’s cash infusion in the startup stood at Rs 288 crore, the rest is the notional loss from a higher valuation than the startup commanded earlier. It had a valuation of Rs 719 crore before Info Edge had to write down its entire investment made through its wholly-owned subsidiary Allcheckdeals India.

A forensic audit was initiated by Info Edge after 4B Networks failed to provide the company with information about operations and management, details and particulars of financial transactions, and transactions with related parties, which it says it was contractually obligated to receive.

Info Edge approached the Delhi High Court in July, and the two companies went into arbitration as mandated by the court. Info Edge filed its complaint with the EOW in August.