Ownership Battle Erupts At Nirmalaya Wellness After Shark Tank Fame

Featuring on Shark Tank India Season 2 in February 2023, the founders of Nirmalaya Wellness made a promising pitch to woo investors about their premium incense sticks, fragrances and other products. They claimed the startup recycled more than 40 tonnes of flowers, collected donated flowers from more than 300 temples in Delhi each month to make these products.

Even without securing any funds from Shark Tank judges, Nirmalaya rode on its fifteen minutes of fame on the show. The founders focused on scaling up the business in this spotlight, but another controversy has now derailed these plans.

Officially launched in June 2021 by Bharat Bansal, Surbhi Bansal and Rajeev Bansal, the organic incense and fragrance brand competes with the likes of Phool and other legacy players in this space.

Cut to June 2023, Nirmalaya is on the verge of a potential legal battle. An FIR filed by Vikas Garg against the company and its founders claims that he is the original founder of the startup and that he was allegedly cheated out of his stake in the company.

In the FIR, registered last week, Vikas claimed that the startup he founded was taken over by Bharat, his wife Surbhi, and their family friend Rajeev, who ‘dishonestly’ forced him out of the company.

While Vikas alleges he was thrown out of his startup, the current founders claim that he voluntarily left the startup and has now come forward to stake a claim after Nirmalaya has gained fame.

The interesting thing to note here is that Vikas and Bharat are relatives and the whole affair looks like a big family feud. While the police uncover more details in the matter, here’s what we found on perusal of the FIR and speaking to both parties.

From Consultants To Founders

This is the broad timeline of the events as alleged in Vikas’ FIR against Nirmalaya and its founders:

• February 28, 2020: Vikas Garg and Rajeev Bansal register Recycle Aastha Nature
• Mid-2020: Rajeev approaches Bharat Bansal & Banbros Consulting to revamp the company
• October 15, 2020: Vikas Garg resigns as a shareholder, transfers shares to Rajeev 
• June 18, 2021: Bharat Bansal registers new company, Nirmalaya Wellness; adds Surbhi & Rajeev Bansal as directors
• August 2022: Nirmalaya raises $800K funding
• February 2023: Nirmalaya appears in Shark Tank
• May 1, 2023: Vikas visits the factory, leading to a fight
• May 3, 2023: Vikas, an unknown person visit the office, allegedly force employees out and lock the premises
• May 15, 2023: Bharat registers a complaint
• June 16, 2023: Vikas files FIR
• June 21, 2023: Whistleblower emails FIR and allegations against founders
  

Speaking to Inc42, Nirmalaya CEO Bharat said that the company was incorporated on February 28, 2020, the same date as mentioned by Vikas in his FIR.

As per the FIR, seen by Inc42, Vikas and Rajeev had registered the company as Recycle Aastha Nature Pvt. Ltd. It was subsequently renamed to Nirmalaya Wellness Pvt. Ltd.

Bharat and Surbhi were not the original founders of the startup and they joined at a later date as consultants through Banbros Consulting, the CEO said. However, Vikas also claims that he hired Bharat Bansal as an additional director, even though he did not elaborate on the reason for this hiring.

Bharat told Inc42 that Vikas and Rajeev had “suffered a loss of roughly INR 60 Lakh-INR 70 Lakh”, following which the duo sought Bharat’s help to run the company.

Bharat claimed he joined the company on the condition that he would not work with Vikas, which Rajeev had allegedly agreed to.

After joining the company, Bharat said he undertook a complete overhaul, changing the product line to cater to the premium segment and rebranding the startup.

The group then filed a declaration for commencement of operations with the Registrar of Companies (RoC) on October 9, 2020.

According to Bharat, following this, Vikas resigned as a shareholder of the erstwhile Recycle Aastha Nature on October 15, 2020, and transferred his shares to Rajeev, who then transferred those shares to Bharat.

However, Vikas has disputed this turn of events in the FIR. He alleges that Bharat and Surbhi ‘forcefully’ took 300 shares owned by him by allegedly forging his signature on a letter of resignation to oust him from the startup. As per the FIR, Vikas’ shares were worth INR 6 Cr, against Nirmalaya’s pre-money valuation of INR 22 Cr at the time.

Incidentally, Garg also resigned as a director of the company in May 2021, claimed Bharat. This claim is corroborated by the documents filed by the company with the Ministry of Corporate Affairs (MCA), as per which Garg resigned on May 10, 2021.

After changing its name to Nirmalaya, the startup raised $850K across two rounds. According to their Shark Tank India pitch, Nirmalaya’s founders diluted a 20% stake during the last funding round.

A Scuffle And An FIR

The ownership dispute took a violent turn on May 1, 2023, when the concerned parties met at Nirmalaya’s factory in Delhi NCR.

In the FIR, Garg claimed he had gone to the Nirmalaya factory with his family members to meet Bharat’s family to find an ‘amicable solution’.

However, this is where things get complicated. In the FIR, Vikas claims that Bharat pushed his father. But separately Bharat alleged that Garg entered into a scuffle with his father.

Inc42 has seen video footage of a scuffle, but this footage does not clearly show the identity of any of the alleged assailants.

Further Bharat also alleged that Vikas forced the employees out of the office and locked the premises in a subsequent meeting on May 3, 2023. Inc42 could not independently verify this particular claim despite being shown CCTV footage of the premises. 

While both Garg and Bharat went to the police to register a complaint against each other, Bharat’s complaint is still not registered as an FIR. He has now moved to a district court to convert his non-cognizable report into an FIR.

Both parties seem to more or less agree on the version of events except for the differing views on the alleged violence at the Nirmalaya factory on May 1.

At the moment, we don’t know if there is any truth to Garg’s allegations in the FIR or, indeed, Bharat’s counterclaims. Will the police investigation lead to a change in ownership at Nirmalaya?

Another Startup In A Tangle

Ownership issues have popped up now and then at Indian startups, with old founders and executives coming forward to claim ownership or shareholding.

A case in point is Paytm. In 2021, a former director of the company, Ashok Kumar Saxena, alleged that he owned a 55% stake in the fintech giant. However, he lacked documentary evidence to support his claim and the police could not bring a case against Paytm or investigate the matter.

Sometimes, none of the parties involved wants anything to do with a startup. For instance, last year’s controversy around WazirX saw Binance and Nischal Shetty refuse to take ownership of the crypto platform. The two companies are still fighting over who owns what aspect of WazirX.

While Nirmalaya’s story appears to be a family feud at a cursory glance, more details are set to come to light as police investigate the matter.