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BharatPe board says Ashneer Grover and family misappropriated funds, reserves right to legal action

"Extensive misappropriation of funds included creating fake vendors to siphon money and grossly abusing company expense accounts," the board said.

March 02, 2022 / 02:43 PM IST
'Shark Tank India' judge and BharatPe founder Ashneer Grover.

'Shark Tank India' judge and BharatPe founder Ashneer Grover.

Ashneer Grover, the embattled and controversial founder of fintech BharatPe, and his family have been found guilty of misappropriating company funds, per a statement released by the firm's board on March 2, opening up a fresh battlefront between the two sides.

The statement said that, as a result of his misdeeds, Grover is no longer an employee, a founder, or a director of the company, adding that the company reserves the right to take legal action.

While the company did not comment on the action it intends to take, sources privy to the development said Grover is likely to lose out around 1.4% of his total restricted shares which could be clawed back by the board.

The statement by BharatPe, which came after a board meeting that lasted over 3 hours, said: "Minutes after Mr. Ashneer Grover received notice that some of the results of the inquiry would be presented to the Board, he quickly shirked responsibility by sending an email to the Board submitting his resignation and fabricating another false narrative of the events to the public."

"The company has taken strong objection to Mr. Grover spinning lies and hurling baseless allegations and threats," the company said alluding to the interviews by him, where he launched direct attacks against the chairman of the board Rajnish Kumar, apart from investors such as Sequoia.

In a serious charge against Ashneer Grover, the statement read, "The Grover family and their relatives engaged in extensive misappropriation of company funds, including, but not limited to, creating fake vendors through which they siphoned money away from the company’s expense account and grossly abused company expense accounts in order to enrich themselves and fund their lavish lifestyles."

"The company reserves all rights to take further legal action against him and his family," it said, an indicator of a bitter legal fight ahead between the two sides.

"As a result of his misdeeds, Mr. Grover is no longer an employee, a founder, or a director of the company," effectively showing him the door.

It further said that the Board is taking all necessary steps to further strengthen the company’s corporate governance, including the appointment of an audit committee, an internal auditor, and the implementation of other key internal controls.

"The success of BharatPe is a result of the collective effort of a large team of dedicated and talented professionals, and not any one individual. We are confident that the company is marking the beginning of a new chapter in its success–one grounded in trust and integrity–and we are excited to embark upon this next leg of our journey."

The board, led by former SBI chairman and veteran banker Rajnish Kumar, met to table the final report of a governance review by independent consultant PwC on March 1. It came nearly 24 hours after Grover resigned from the company, claiming he was vilified.

Bitter battle

BharatPe co-founder Ashneer Grover, who resigned as managing director on March 1 ahead of the crucial board meeting, said the investigation against him was a 'sham' and launched a fusillade of angry comments against the board, especially chairman Rajnish Kumar, accusing it of failing to keep details of their actions confidential.

"The whole process is a sham. You have decided what you want. There is no consideration for any process. You are just going after me, my wife, my whole family. Have you even called me once? Have the investors even spoken to me even once? What kind of a process is this where the chairman of SBI can't run a confidential process for a month? " Grover told Moneycontrol, in his first comments after his resignation letter to the board was made public.

Grover’s resignation was the consequence of a messy, “dirty linen washed in full public view” kind of battle with the boardroom that played out over the past month. The board of BharatPe, which allows shopkeepers to make digital payments through QR codes, had sought Grover's presence in the meeting.

What will Grover do now?

Grover, who was helming one of India's youngest companies, said he will look at founders who have had the 'courage to build businesses with 100 percent ownership'. Grover holds a 9.5 percent stake in BharatPe.

"I am now looking up to people like Turakhias (Bhavin) and Kamath (Nitin of Zerodha) who have the courage to build businesses with 100% ownership. It will take a bit longer to build. I will be in control of what I build and not build it for these people who are opportunistic," he said.

Grover's resignation also came close on the heels of the termination of his wife from the post of BharatPe's Head of Controls. In a two-page resignation letter, Grover alleged that he and his family have been embroiled in baseless targeted attacks.

In his letter, he has also pointed fingers at investors blaming them for treating founders as slaves. "You treat us Founders as slaves – pushing us to build multi-billion-dollar businesses and cutting us down at will. Investor-Founder relation in India is one of Master-Slave. I am the rebel slave who must be hung by the tree so none of the other slaves can dare to be like me ever again," the letter read.

This comes after Moneycontrol reported on February 27 that BharatPe cofounder Grover's emergency arbitration plea challenging the firm's decision to conduct a governance review had been rejected by the Singapore International Arbitration Centre (SIAC).

In his resignation letter, Grover wrote: "From being celebrated as the face of Indian entrepreneurship and an inspiration to the Indian youth to build their own businesses, I am now wasting myself fighting a long, lonely battle against my own investors and management. Unfortunately, in this battle, the management has lost of what is actually at stake – BharatPe."

Many twists and turns

On January 28, BharatPe, which is targeting an initial public offering (IPO), disclosed it had hired Alvarez to conduct a governance review of the company. The next week, it confirmed it had also roped in PwC.

Moneycontrol also reported on February 7 that the decision to bring PwC after hiring Alvarez was a step towards terminating the services of Madhuri Jain Grover and Ashneer Grover, as their ouster can only happen after a report by a Big 4 audit firm indicts them. According to a preliminary report by Alvarez conducted in January, inconsistencies were found in dealings with vendors. The report had flagged payments to vendors and consultants that were non-existent.

Allegations and counter-allegations have become the new norm at beleaguered fintech BharatPe. Soon after the embattled co-founder Ashneer Grover launched an attack on the chairman of the board of directors Rajnish Kumar and co-founder Bhavik Koladiya alleging the governance review was riddled with prejudice, the company accused him of spreading false information which it says is not appropriate for a managing director.

Grover told Moneycontrol earlier during the day that his resignation was triggered by the way the board was conducting the governance review and targeting his family and that he was not acting on his lawyer's advice. Sources Moneycontrol spoke to suggested that Grover may have resigned to preempt the company from sacking him and clawing back his shares.

Responding to allegations by BharatPe, Grover said, "I am appalled at the personal nature of the company’s statement, but not surprised. It comes from a position of personal hatred and low thinking."

He added that the investors bought around $12 million worth of secondary shares from him in Series C, D and E funding rounds collectively and once again attacked the legal firms and consulting agencies associated with BharatPe for their role in the governance review process.

"I would also want to learn who among Amarchand, PwC and A&M (Alvarez and Marsal) has started doing audit on ‘lavishness’ of one’s lifestyle ? The only thing lavish about me is my dreams and ability to achieve them against all odds through hard work and enterprise," he said.

In a detailed interaction on March 1 with Moneycontrol, he had said that he would continue to be a shareholder in the company. However, there was no mention of the status of the same from either of the parties on March 2.

Grover was sent on a leave of absence till March-end amid backlash regarding his abusive language to a Kotak employee, toxic culture at BharatPe, and brash behavior.

Jain, whose service was terminated last week, had also launched a Twitter attack on the company. She had posted multiple videos of the office where employees could be seen partying. She had alleged that in this whole episode, she was treated like an "object".

"Now you may indulge in your ‘drunken orgies’ without having to wait for me (righteous lady) to leave office. Slow clap," her tweet read.

Interestingly, her entire Twitter thread has now been deleted.

In a response to Moneycontrol's query, she said that it was time to move ahead in life away from the endless "media drama".

"We have already made our point about the nature of personally targeted, biased and deplorable conduct of the company with respect to Ashneer, me and our family. We stand by each of our statements but it’s time for us to move ahead towards positivity and away from this endless media drama," she said.

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Priyanka Sahay
Priyanka Sahay
first published: Mar 2, 2022 11:51 am