Praveen Sinha initiates legal action against Twitter user over financial fraud allegations at Jabong
Praveen Sinha, founding team member and former managing director of fashion e-tailer Jabong, has initiated legal action against Twitter account holder Unicon Baba who made allegations of corporate governance violations and financial fraud against Sinha during his reign at the e-commerce firm.
A tweet from the anonymous Twitter handle had, on July 7, alleged that Rocket Internet, the parent investor in Jabong, is pursuing a case against Sinha for siphoning off more than Rs 100 crore from the company. The tweet was later deleted.
Initiating legal action against the user who handles the twitter account, Sinha has filed a complained before the Economic Offences Wing and a local police station in Central Delhi. "My lawyers had filed a complaint under the IPC and the Information Technology Act against a Twitter handle because false and defamatory tweets were posted against me. These were filed by my lawyers before the Economic Offences Wing and local police station in Central Delhi," he said in an email response to Techcircle.in.
Meanwhile, Mint has reported that Sinha's lawyers have written to Twitter seeking the identity of Unicon Baba and the location from which the tweets are posted.
The development took a new turn after an yet-to-be-launched online media platform named The Ken on July 16 first reported about a forensic audit conducted by accounting firm PwC (PriceWaterHouseCoopers) which has allegedly found several counts of corporate governance violations by former top executives of Jabong.
According to the report, Rocket Internet commissioned PricewaterhouseCoopers AB in Stockholm to conduct a forensic audit of Jabong's operations. Jabong's former CEO Arun Chandra Mohan, former Rocket Internet India managing director Heavent Malhotra and Sinha were subject to the investigation.
The interim summary of the probe, codenamed Project Flush, were first brought out by the Twitter user Unicon Baba.
The major finding in the report revolves around the transfer of Jabong's logistics arm Gojavas to an entity controlled by Sinha, shares of which were later sold to Jasper Infotech Pvt. Ltd, which runs Snapdeal. Jasper Infotech had made an undisclosed amount of investment in logistics firm QuickDel Logistics Pvt. Ltd, which runs operations under the Gojavas brand, in March 2015 and later invested $20 million (Rs 131 crore) more in October 2015.
Sinha allegedly owned about 50% stake in QuickDel before selling its shares to Jasper Infotech. "As per information obtained from a return of allotment document dated 27 February 2015 and the annual return of QuickDel for the financial year ending 31 March 2014, the amount earned by Sinha in the above operation might have been approximately $10 million," the PwC report said.
According to a report by The Economic Times, the PwC investigation also found that Sinha, Mohan and Malhotra had business interests in third-party sellers trading with Jabong.
The forensic audit also questioned the transactions between Jabong and an entity named Value Shoppe Retail. It found that a Jabong employee was the director at Value Shoppe and that the office of Value Shoppe was the same as the address for Xerion, the B2C entity of Jabong.
Responding to an e-mail query, Sinha said: "I have never been informed by Jabong's investors of any PwC report that has been referred to. I came to know of it recently through a media report. While it is very easy for anyone to speculate and make false allegations, it is equally difficult for the subject of such allegations to prevent the damage and reputational loss one suffers on account of the same. Post the report, I have called many people to get more information, and I understand that while there was indeed an investigation, nothing had come out of it to conclude any personal gains, etc as is being alleged by certain quarters." Separate e-mail queries sent to Rocket Internet, Jabong and Snapdeal did not elicit a response till the time of filing this article.
Meanwhile, according to a Business Standard report, Global Fashion Group (GFG), the holding company of six online apparel retailers including Jabong, is mulling legal action against the former top executives of the fashion portal. Citing unnamed sources, the report claimed that GFG is likely to file civil and criminal charges against the accused in the next few days.
According to several recent media reports, Jabong has re-initiated talks with a number of internet companies including Snapdeal, Alibaba, Flipkart-owned Myntra, and Aditya Birla's e-commerce venture Abof besides Future Group for a possible sale of the firm.
"It is indeed extremely unfortunate that this issue is being sensationalised at a time when multiple positive developments were shaping up for the companies in question. I hope these developments will not be adversely impacted by such incomplete and baseless allegations," Sinha said with reference to the developments at Jabong.
While Jabong is looking for a $250 million valuation, it is likely to settle for $180-200 million. For parent Rocket Internet, the sale of Jabong would mean a near exit from India. It sold its online furniture store FabFurnish.com to Future Group earlier this year. Foodpanda, Rocket's other major investment interest in India, too had been subject to allegations of corporate governance violations. Rocket is reportedly struggling to find a buyer for Foodpanda.
Jabong, Rocket Internet's biggest bet in India, has been doing well in the niche segment of online fashion sales. In terms of revenue, it fared better than its closest rival Myntra in 2014-15. It posted Rs 1,085 crore revenues while Myntra's revenue during the same period was Rs 773 crore.
It also reported a marked improvement in performance in the three months ended March 31, 2016, while simultaneously cutting down operating loss. The firm posted its best transaction volumes, net revenue and gross merchandise value (GMV) since October-December 2014. Operating loss, too, was the lowest in almost two years.
Rocket Internet's core model is to replicate successful global internet businesses in emerging markets outside China with rigorous marketing. It brings in industry executives, gives them stakes in its companies and designates them as co-founder, founder or CEO. Most of its portfolio companies operate in multiple regions.
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