Yogendra Vasupal, CEO and co-founder of homestay network Stayzilla has been in jail for over 20 days now. He was denied bail for the second time on March 29, 2017 by principal sessions Judge M Nazir Ahmed in the case of allegedly cheating an advertising vendor.
At that time it was reported that the bail plea of Vasupal and anticipatory bail application of co-founder Sachit Singhi were dismissed. Vasupal was arrested on fraud charges by the Chennai police on March 14, 2017. The FIR was filed under IPC sections 420 – Cheating, 406 – (Criminal Breach of Trust), and 506 (i) – Criminal Intimidation.
In a recent turn of events as per sources close to the development a bail application has been submitted to the Madras High Court, for Vasupal’s bail.
The Story So Far
Reports reveal that Vasupal was brought up on charges of fraud to the tune of about $265K (INR 1.72 Cr) by JigSaw Advertising Agency. A Medium blogpost, written by Yogendra appeared hours after his arrest, as a cry for help from a founder who claimed to have been wrongfully arrested.
The blog highlighted, how Stayzilla founders were threatened by its landlord first and then by vendors for money and payback. One of its vendor Jigsaw had lodged a complaint at the Mylapore police station in Chennai against both Vasupal and Singhi, accusing them of fraud. Following which Vasupal was arrested.
In the blogpost Vasupal said, “On March 9th, two policemen in Bangalore came home in mufti and stated that I am wanted in the station for questioning. I was told that there is a case against me by somebody from Chennai for cheating, intimidation and etc. I recognised the name of the complainant and informed them that there was a dispute between 2 companies and we had asked the other company to take it up in the court. I don’t personally owe anybody money and I am wondering how can they get confused on such a basic matter as this was a clear civil case.”
During the later part of the day though, Aditya CS, (JigSaw Solution and Advertising owner) claimed that Stayzilla founders were fraudulent and the company never conveyed any deficiency in services to them. The report also contained an audit confirmation letter by Insara Technologies, the parent company of Stayzilla, acknowledging a balance of INR 1,56,32,992 due to JigSaw.
According to the report, Aditya filed a complaint with the Central Crime Branch in Chennai on March 8, 2017 and an FIR under IPC section 420 (fraud), 406 (criminal breach of trust) and 506 (criminal intimidation) on March 13, 2017. Defending the reason behind filing a case of intimidation instead of a civil case, he said, “It is my lawyer’s prerogative to file a case with the Central Crime Branch. I cannot comment on that.”
On March 23, 2017 the Special Metropolitan Magistrate court for CCB-CBCID dismissed Vasupal’s bail plea for the first time.
The Accusations And The Defence
As per claims made by the defendant, the bill drawn by JigSaw Advertising Agency is disputed as the ‘vendor had not put up displays in most Tier II cities, they billed for.’
The claims made by the agency also state that the founder took money apart from salary drawn, and paid the same to relatives who were not employees.
However, Yogi’s family and friends, in the most recent Medium post claimed that the payments were rent for office space, and reimbursement of server bills, paid via personal credit card. They claimed that the allegations were false, baseless claims, made primarily to harass the founder and extort money from him.
Also while justifying his allegations, Aditya CS shared a emails sent by Stayzilla’s co-founder, Sachit Singhi, assuring Jigsaw that all dues would be cleared by the startup.
However, the mail from Singhi clearly states that he needs to ‘discuss internally’ about the billboards campaign and revert later. This does not provide a confirmation to pay for the billboard campaigns.
Also, as per sources close to the development, Stayzilla owed a total amount of about $1.38 Mn (INR 9 Cr ) to JigSaw. Of this, only the disputed amount of about $265K (INR 1.72 Cr) of the billboards has been not been paid by the Stayzilla team yet.
Founded in 2005 by Sachit Singhi, Yogendra Vasupal, Rupal Yogendra, as Inasra, and later rebranded to Stayzilla in 2010 – the platform acted as a marketplace for homestays and alternate stays in India, with around 55,000 stay options across 4,500 towns in the country. The Bengaluru-based homestay network suspended operations on February 23, 2017. Founder Yogendra announced his decision via blog post.
The Insolvency and Bankruptcy Bill 2015 (“IBB”), tabled in the Lok Sabha in December 2015, the government looking to fast track the voluntary closure of businesses, states, “Startups with simple debt structures or those meeting such criteria as may be specified may be wound up within a period of 90 days from making of an application for winding up on a fast track basis.”
This means that the founders of the company had about 90 days to clear their dues.
Initially, when the news of the arrest surfaced, the entire startup community went into a tizzy. Vasupal’s arrest prompted a number of prominent entrepreneurs and investors to step forward calling for his immediate release.
The incident, amidst accusations of wrongful arrest, sparked a sense of agitation and revolt in the Indian startup ecosystem. A website by the name of ‘Help Yogi’ was created by industry headliners to gain support from the startup community.
Also, an open letter was sent to the Home Minister Rajnath Singh; Nirmala Sitharaman, Minister of State for Commerce and Industry; Amitabh Kant, CEO, Niti Aayog; Edappadi K. Palaniswami, Chief Minister, Tamil Nadu; Rajiv Mehrishi, Home Secretary, Ministry of Home Affairs; Ramesh Abhishek, Secretary, Department of Industrial Policy and Promotion demanding Yogi’s immediate release and highlighting the issue.
Over 500 startup stalwarts including Paytm CEO Vijay Shekhar Sharma, Ola’s Bhavish Aggarwal, Mohandas Pai of 3one4 Capital came forward and signed the online petition to support Yogendra.
Mahesh Murthy took to Twitter to express his views about the case.
Which is more fixed: founder’s principles or the judge?#Stayzilla founder bail rejected again.
Unpaid bill is civil issue, not criminal.
— Mahesh Murthy (@maheshmurthy) March 29, 2017
An entrepreneur from Jabalpur, also launched a campaign on change.org writing to the PM. The petition stated, “Today is day 20 of the Stayzilla case. The founder was arrested by police on false criminal charges. There is anger, despair and a sense of fear in the startup ecosystem.”
It goes on to state, “He is afraid and hurt. And this clearly shows in his petition. I believe, we should support him. We should also help spread the word.” Protect Startups from Abuse of Law & Order
In an email interaction with Inc42, industry stalwart Sharad Sharma said, “We typically don’t realise how screwed up our system is and how vulnerable we all are to political goondaism until somebody decides to take a stand. Yogi could have been out of jail on the first day had he been willing to settle (which many of us, including me, asked him to do). But he believes that paying a wrong invoice in this situation would be like paying a ransom. His heroic stand will help make the system better. Do stand up for him!”
He further added, that the case is a “small invoice dispute” (INR 1.7 Cr out of INR 9 Cr billing) turned into a criminal case.
He further added that the situation depicted “political goondaism wherein the police commissioner, state public prosecutor along with an MLA appear to be supporting JigSaw.”
He also said that this case might have a “searing effect on future of middle-class techies turning entrepreneurs as failure is criminalised.
As per a source close to the development, apart from appeal to High court, getting anticipatory bail for the other co-founder and Yogi’s wife and even a counter-suit is being considered.
However, the aftermath of Yogi’s arrest have raised a lot of unsettling questions regarding the Indian penal system. Why were proceedings made as a criminal case and not a civil case being the first one. Also, it remains to be seen how Yogi, his family and the company deal with this ongoing nightmare.