Co-working firm Innov8 goes into arbitration with Rahul Yadav's 4B Networks for unpaid dues

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Troubles for Rahul Yadav may just be beginning, as mounting problems surrounding 4B Networks now come knocking at his door. At least two known matters in arbitration, and there's a criminal case as well.

While it’s known that Yadav is in arbitration with Info Edge, 4B Networks and Yadav have also locked horns with Guerrilla Infra Solutions Private Limited, popularly known as Innov8, a co-working company. The two are in arbitration under the aegis of Delhi High Court, with the matter being in front of the court since April.

Sources said that 4B Networks rented out an Innov8 office space in Mumbai, but did not pay rent amounting to Rs 1.08 crore. The company also did not give notice and packed up the office and left one day.

Since the agreement between both parties had an arbitration clause, Innov8 had to go through the process before filing a criminal case, a person close to the matter said.

The case was filed by Innov8 under Section 11 of the Arbitration and Conciliation Act after Innov8’s attempts to resolve the issue failed, as Yadav did not respond to calls and emails, the source quoted above said.

While three sessions have happened so far, an arbitrator has not yet been appointed. The next proceeding will happen on August 28.

The other arbitration case that 4B Networks is a party to may also not be progressing well.

Yadav is currently in arbitration with the backer of his startup, Info Edge. According to two persons aware of developments, Yadav is believed to have asked for more time to understand the arbitration case to find an amicable solution to the current impasse.

After Info Edge wrote down its entire investment of Rs 288 crore in the Yadav-led startup, a forensic audit was initiated. However, Yadav refused to let the auditor Deloitte carry out the process. Info Edge then approached Delhi High Court to enforce the audit and the two companies went into arbitration a fortnight ago as mandated by the Delhi High Court. The first hearing in the matter was on August 14. Moneycontrol could not ascertain when the next sitting will be.

Apart from the cases in arbitration, there is also a criminal case against Yadav, filed by an ad agency with Rs 10 crore in unpaid dues.

Yadav has been questioned by the Mumbai Police twice at the commissioner's office this week after a first information report (FIR) was registered.

Sources also said that the Economic Offences Wing carried out searches of his house in Mumbai in the past week, after he was also questioned at the police headquarters.

According to the allegations in the FIR, Yadav is said to have used deceptive practices resulting in the complainant's company incurring a loss of Rs 10 crore.

The FIR was filed after the complaint by Vikas Om Prakas Nowal, who is a part of Interspace Communication Private Limited — the company that carried out an advertising campaign for Yadav's 4B Networks. The FIR also names Sanjay Saini, one of 4B’s founding members.

The charges in the FIR are under Sections 406 (Punishment for criminal breach of trust), 409 (Criminal breach of trust), 420 (Cheating) and 34 (Acts done by several persons in furtherance of common intention) of the Indian Penal Code.

According to the FIR, Interspace put up a total of 83 advertisement hoardings at different places in Pune from April to August for a campaign that 4B Networks had run. Interspace also generated 14 invoices for the work completed and sent them to 4B Networks.

Yadav and Saini did not raise any dispute, but the payment was not made. The FIR alleges that while a few payments were made in the beginning, the company refused to pay later on.

The unpaid dues for a year’s worth of services rendered amount to Rs 7.3 crore. With interest, the total amount stands at Rs 10 crore.

Nowal first approached the National Company Law Tribunal, and then went to the cops.

Queries sent to Yadav were unanswered at the time of publishing.

This is not the first time that Yadav has been accused of such practices. Employees and other vendors have accused him of non-payment of dues and salaries, even though he has repeatedly raised money from Info Edge for this purpose.

Info ​Edge​, which owns more than 59 percent of the company, wrote down its entire investment of Rs 288 crore in the startup. In fact, after the investment of Rs 276 crore that Info Edge made was exhausted, the company had given Rs 12 crore in debt financing to the company to pay employees and vendors — which too wasn’t done.

A forensic audit was initiated by Info Edge after this, but according to a stock exchange filing, Yadav did not provide details. The audit was initiated after 4B Networks, under Yadav, 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.