There seems to be no respite to Snapdeal’s woes. The online marketplace, which is rumoured to be in the throes of a stake sale to Flipkart, with the Board of Directors failing agree to a deal, has hit yet another roadblock.
Its parent company Jasper Infotech, co-founder Kunal Bahl, and nine other executives have been summoned by the VIII Additional Chief Metropolitan Magistrate, Bengaluru for a case filed by event company Dream Merchants over unpaid bills.
Dream Merchants organises the bi-annual Bangalore Fashion Week, which signed Snapdeal up for a three-year contract as a `powered by’ sponsor for six editions. The company alleges that it has not received the promised sponsorship amount of $38.4K(INR 25 Lakhs) in January 2016, as per ET. Subsequently, it approached the court for non payment of dues in March 2016.
Feroz Khan, founder Dream Merchants, told ET that Snapdeal backed out of the Bangalore Fashion Week 15 days before the event was scheduled to take place in February 2015, in violation of the 60-day exit clause specified in the contract. No reason was given for the same. However, despite no funding, Dream Merchants went ahead with the event incorporating Snapdeal’s logos. Snapdeal did not honour the invoice or notices sent later.
Furthermore, Amit Maheshwari, the then Vice-President of marketing (fashion vertical) at Snapdeal who had initiated the collaboration, refused to pick up calls. Maheshwari, who was later elevated to head of Snapdeal’s premium fashion vertical Exclusively.com, left the company in February this year, along with other top tier exits from the company.
Feroze added that Snapdeal also committed to upgrade to title-sponsor for the July 2016 edition of the event for an amount of $115K (INR 75 Lakhs). The terms of the contract included a non-compete clause, which forbade Dream Merchants from working with Snapdeal’s competitors. The firm is demanding compensation for loss of potential income.
Meanwhile, a Snapdeal spokesperson told Inc42: “The company is yet to see the complaint filed against it. The company will take all appropriate legal steps to defend itself and its employees against all baseless allegations.”
The online marketplace had faced a similar situation last month when a group of merchants that represents small online sellers had claimed that its members are still waiting for their dues to be cleared by Snapdeal. Snapdeal had allegedly not cleared the payments for eight months. Earlier this week, reports surfaced that SoftBank had revoked a debt financing offer, as part of a supposed $150 Mn-$200 Mn funding round, due to a spat among the board members.
Meanwhile, as far as the sale to Flipkart is concerned, nothing seems to be final yet. As per a Business Standard report, no conclusion has been achieved as the meeting failed to reach a consensus. The Board of Directors, including the two founders, have refused to agree to the terms of the deal.
(This development was first reported in ET.)