FIR Against Rahul Yadav: Lookout Notice Issued By EOW, Bank Account Frozen

In fresh legal trouble for Rahul Yadav, the founder of Broker Network, a Rajasthan-based vendor, has filed a first information report (FIR) against Yadav for alleged fraud and criminal breach of trust with the Economic Offences Wing (EOW).

The FIR filed by Vikas Nowal, country head and cofounder of Interspace Communications, has been registered under sections 406, 409, 420, 34 of the Indian Penal Code.

Interspace Communications is an advertising agency that was empanelled by Broker Network to carry out outdoor advertising campaigns in February 2022. In his FIR, Nowal has alleged that the company has defrauded Interspace, which is owed INR 10 Cr by Broker Network (4B Networks Private Limited) for the activity undertaken in 2022.

The FIR claims that a total of 83 ad hoardings were installed by Interspace in Pune from April to August 2022.

Inc42’s exclusive deep dive into Yadav’s Broker Network in June this year had reported on Interspace being one of the vendors that has not been paid by BN since last year. Besides the ad agency, software development company NeoSoft and home loans agent Finqy are also owed amounts to the tune of over INR 10 Cr, as per our original reportage on Broker Network’s problems and cash crunch.

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In the case of Interspace Communications, the issue is related to Broker Network having multiple vendors for outdoor advertising campaigns, with only one of these vendors being paid on time.

Former employees at Broker Network told Inc42 in June that besides Interspace, the company also signed another contract with NSE-listed Vertoz Advertising Limited for a similar campaign in Pune. As per invoices seen by Inc42, Broker Network paid Vertoz INR 11.8 Cr through much of 2022, though withheld the payments for Interspace.

Following the registration of the FIR last week, a lookout circular (LOC) has been issued by the police. Yadav’s bank account is said to have been frozen, with searches conducted at his residence, according to an EOW official who spoke to Inc42 on the condition of anonymity.

The official added that Interspace brought the complaint to EOW in July 2023, after another complaint had already been registered in Mumbai’s Amboli Police Station.

We were also told that EOW officials questioned Yadav on Saturday, August 19, 2023, during the official raid at his residence. As of now, no arrests have been made in the case.

Rahul Yadav’s Mysterious Home Loan Defaults

Besides the FIR registered by the EOW, Inc42 has also seen a public notice by ICICI Bank in relation to a property loan default by Yadav and his wife, Karishma Singh. The ICICI Bank notice dates back to April 2022 and is for a default amount of over INR 5.9 Cr for two properties.

Incidentally, both properties are located in Kanakia Paris, a residential property in Mumbai’s BKC area. Besides Yadav, sources allege that other employees of Broker Network also had purchased properties in Kanakia Paris.

Besides Rahul Yadav, his brother-in-law Devesh Singh who’s listed as a director in Broker Network, also purchased properties at Kanakia Paris. Broker Network’s key employees Sanjay Saini, Prateek Chaudhary, former CTO Vivek Jagtap as well as current CTO Rahul Yadav (unrelated to the founder) also bought properties here.

Broker Network’s former employees told Inc42 this week that all these properties belonged to Danishmand Merchant, a name that had already come up in our past investigation into the company.

Sources alleged that most of these properties were purchased at a premium on the prevailing fair value for properties in the neighbourhood. “There was never any intention of paying back this loan,” one of the sources told us.

Merchant’s Ace Housing & Construction is a co-promoter for Kanakia Paris, as per details sourced from Maharashtra’s RERA database. The RERA filings show that Ace Housing has an ‘area share’ arrangement with Kanakia.

Inc42 has reached out to Rahul Yadav for a comment on the loan defaults and we will update this story with a response as and when we receive it.

In the past, Inc42’s investigation had revealed a connection between Rahul Yadav and Danishmand Merchant, who served as a partner at Yadav’s RY Advisory between 2019 and 2020.

Merchant’s other companies Ace Links and Ace Housing & Construction, were alleged to have been involved in Broker Network’s dealings.

Besides this, Inc42 had reported on other transactions that further linked Yadav and Merchant — particularly with three separate leave and licence agreements for office properties in Bandra. These were rented by Broker Network from Merchant and his company, Ace Links, with an attached refundable security deposit of INR 7.5 Cr.

These were signed in 2021, but multiple employees claimed that in October 2021, Broker Network moved to a coworking space in Andheri and then again to another office in September 2022. Employees alleged the rental agreements were for properties used by just 15-20 employees.

When questioned about these rentals, Yadav told Inc42 at the time that the security deposits were repaid to Broker Network, but did not share any proof for the same.

Info Edge Probes Broker Network

The former Housing.com cofounder is also the target of an arbitration hearing by Broker Network’s lead investor Info Edge. The Delhi NCR-based internet giant had initiated a forensic audit into Broker Network, alleging that Yadav had refused to disclose details of financial transactions and related-party activities.

The related party transactions include Yadav’s connection to other companies such as Kult Cosmetics, where his wife Karishma Singh is a director. Besides this, Yadav’s holding company RY Advisory is also said to be linked to Broker Network through other companies.

Info Edge also moved the Delhi High Court against Yadav and Pratik Choudhary, who was also a party to the shareholders’ agreement of 4B Networks.

Info Edge said that in an order dated July 24, 2023, the HC directed Yadav and Choudhary to not sell, transfer, alienate, encumber or otherwise create any third-party rights or interest directly or indirectly in the assets and properties of 4B Networks (whether tangible or intangible).

On the other hand, the court also directed the startup to preserve all books, records, accounts, databases, servers, any other devices, documentation or information.

“The matter has now been referred to arbitration and the parties have agreed to the appointment of a sole arbitrator,” Info Edge said in its filings last quarter.

As of now, it’s not clear whether the new EOW investigation will also cover any facts uncovered by any arbitration proceedings between Info Edge and Rahul Yadav.