Medikabazaar Vs Cofounder: Delhi HC Sends Dispute To Arbitration

The Delhi High Court (HC) has sent Medikabazaar and the B2B medical supply chain startup’s ousted cofounder Vivek Tiwari’s ongoing case to arbitration. 

This follows Tiwari approaching the HC in August last year after he was stripped of his position as CEO. In the petition, he alleged that his firing hurt his rights as a promoter and stopped him from being part of the company’s daily work. 

The HC’s directions came as both sides agreed to sort the matter through arbitration. 

During the hearing, Tiwari’s counsel pointed to two agreements the former CEO had signed with the company – a shareholders’ deal and an employment contract. These agreements include arbitration clauses. 

While Tiwari chose former chief justice of Himachal Pradesh HC Rajiv Shakdher as his arbitrator, Medikabazaar selected former Delhi HC judge GS Sistani. The two parties will now pick a third and main arbitrator to oversee the dispute. The process will follow the rules of the Delhi International Arbitration Centre (DIAC).

Meanwhile, Tiwari told Inc42 that he has been trying to protect his promoter rights, adding that the board’s actions to oust him were not just unlawful but also “motivated to dilute” his equity.

Noting that the HC told both the sides to settle the case in February this year, Tiwari alleged that he was suddenly hit with what he called “pressure tactics” even as discussions were underway to resolve the case. 

“On February 11, a settlement was proposed, and since then, we’ve been trying to find common ground. Unfortunately, the terms they offered were not acceptable to me. We had another court date on March 17, and then again on April 2,” Tiwari said.

He further added, “To my surprise, around April 2, the company activated the EOW (Delhi Police Economic Offences Wing) complaint. While they were talking about settlement and involving shareholders in open court discussions, they simultaneously took actions that didn’t align with the spirit of settlement.”

The former CEO said that Medikabazaar’s board activated the complaint right before his international trip. According to him, he was supposed to travel on April 7 but received a notice from the EOW on April 4. 

“I informed the Investigating Officer that I would comply. I sent him a formal letter and a WhatsApp message requesting more time or a chance to join virtually due to prior business commitments,” he said. However, according to him, despite the said events, the board filed an FIR on April 11 against him, including several “baseless” allegations.

Apart from Tiwari, the FIR also includes 14 others, including Medikabazaar cofounder and former CFO Ketan Malkan. 

What’s The Case?

The latest development comes after it was reported last month that Medikabazaar removed Tiwari from the company’s board on allegations of financial mismanagement, governance failures, and fraudulent conduct. This followed the company ousting him as the CEO last year and replacing him with Dinesh Lodha. 

It all started after an anonymous whistleblower complaint, last year, alleged financial irregularities at the startup, involving Tiwari, the then recently appointed CFO Raman Chawla, and 15 other employees.

Following this, the startup’s board roped in an independent investigator to probe the complaint. But even before the report was submitted, auditor PwC raised concerns that Medikabazaar had overstated its gross merchandise value by at least 60% as the same medical products were repeatedly sold through multiple entities, artificially inflating the startup’s business metrics. 

After his ouster, Tiwari moved the Delhi HC against the startup and some of its investors. In the petition filed with the HC, the founder accused Medikabazaar’s investors – HealthQuad, Creaegis, and Ackermans & van Haaren – of orchestrating a plan to unlawfully strip him of his position and rights as a promoter.