In its lawsuit in the Delhi HC, Saarthi has claimed that its investors are yet to receive their stipulated agreements or corresponding equity post the execution of the deal
Saarthi cofounder and investors have also filed a police complaint against Classplus, its cofounders Mukul Rustagi and Bhaswat Agarwal, and CFO Sankalp Aggarwal
The lawsuit has also made multiple other allegations against Classplus, including extortion, mental harassment, defamation, theft of immovable property, among others
Edtech startup Saarthi’s cofounder Chiraag Kapil and investors have filed a lawsuit against classplus
in the Delhi High Court (HC) for alleged cheating and criminal breach of trust.
As per the lawsuit, edtech-SaaS platform Classplus acquired Saarthi in 2022 but the investors associated with the latter are yet to receive their stipulated agreements or the corresponding equity in Classplus they were entitled to post the execution of the deal.
The petition also claims that Kapil was onboarded as a key executive personnel during the acquisition process in November 2021 but was ‘unexpectedly’ terminated months later in August 2022.
Apart from the lawsuit, Kapil and other Saarthi investors have also filed a police complaint against Classplus, its cofounders Mukul Rustagi and Bhaswat Agarwal, and chief financial officer (CFO) Sankalp Aggarwal in the matter.
The aggrieved investors reportedly include Kris Gopalakrishnan-backed Axilor Ventures, Faad Network, Innov8 founder Ritesh Malik, Vinod Sood, Rahul Dalmia, among others. However, Gopalakrishnan told ET that he was not aware of any complaint made by Axilor Ventures.
The lawsuit has also made multiple other allegations including extortion, mental harassment, defamation, theft of immovable property, misappropriation of funds, among others, against Classplus.
Meanwhile, both the edtech startups have submitted their responses before the Delhi HC, which has now scheduled the matter for hearing in September.
“Saarthi was a pre-revenue company when we conducted the deal. Both founders of the company got cash payouts from Classplus on day one of their journey with us. Chirag left in Aug 2022 while Saransh, the other co-founder, stayed for more than a year, till May 2023. There is no merit in the allegations made against us due to the same reasons and facts,” Classplus said in a statement sent to Inc42.
Acquisition Gone Wrong
At the heart of the matter is Classplus’ acquisition of Saarthi. In October 2021, Classplus first floated a proposal for the acquisition of Saarthi. As per Saarthi, the presented proposal offered seemingly ‘advantageous terms’ and involved a complex transfer of business operations and employees from Saarthi to Classplus.
By the time the acquisition negotiations commenced in November 2021, the two entities, as per the lawsuit, were already operating ‘almost as a unified entity’. As per Saarthi, its cofounder Kapil even assumed a key executive role within Classplus.
However, Saarthi claims that by December 2021, when the term sheet was finally presented, the stipulated clauses ‘diverged’ from the terms previously discussed. The lawsuit further alleges that the ‘imbalanced nature’ of the negotiations and the subsequent events left Saarthi and its investors in a disadvantaged position.
Saarthi’s petition also claims that Classplus, by then, had access to Saarthi’s proprietary information, workforce, intellectual property, and database.
“Classplus’s failure to pay us (Saarthi’s investors), despite numerous attempts to resolve the issue, is more than just negligence—it’s a glaring sign of bad faith. We investors were left abandoned and deceived, and we demand immediate action. This isn’t just business; it’s a matter of principle, and we won’t rest until it’s rectified,” Ayush Banka, cofounder of Leaf Studios and an investor in Saarthi, told The Morning Context, which first reported the development.
Founded in 2018 by Rustagi and Agarwal, Classplus offers a full-stack enterprisetech edtech platform to enable educators and content creators to sell courses online, build their online presence and digitise their offline coaching centres.
Classplus was valued at more than $600 Mn last year and is backed by marquee names such as Tiger Global, Peak XV Partners’ incubation programme Surge, Blume Ventures, Alpha Wave, and GSV Ventures.
With this, another edtech startup has landed in a soup after raising huge amounts of capital in the funding boom of 2021. This adds to a string of controversies that have plagued the edtech startup ecosystem, which has seen shut downs, valuation markdowns, layoffs, regulatory scrutiny, plummeting user numbers and a funding drought.
With the case now in Delhi HC, the stage is set for another David vs Goliath as the larger edtech industry continues to reel under a spate of bad news.
