Snapdeal's Founders In Trouble For Copying Business Model & Non-Payment of Dues

The Delhi Sessions court has directed founders of e-commerce firm Snapdeal, Kunal Bahl (CEO) and Rohit Bansal (COO) and former CEO Vijay Ajmera to respond to the cheating charges entrepreneur Gaurav Dua.

The entrepreneur Gaurav Dua claims that he was the brain behind bringing the non-inventory marketplace model for retail in India. He has allegedly put charges with regard to the ideation of the marketplace model Snapdeal currently operates with; on the pretext of collaborating with him. Dua claims he also applied for a patent on the said business model in the middle of 2007, and he got the certificate in January 2008.

At first, Kunal Bahl faces a cheating case for cancelling a sponsorship contract, days after homestay startup Stayzilla’s co-founder was arrested over unpaid dues.

A Bengaluru court ordered that a case be registered against Snapdeal’s parent Jasper Infotech Pvt. Ltd., Bahl and 10 other executives in a complaint by event management firm Dream Merchants. The e-tailer unilaterally cancelled a three-year contract to sponsor the Bangalore Fashion Week (BFW), the complaint said.

Later, Gaurav Dua alleged that the Snapdeal officials cheated him under the garb of raising funds for his business. Dua had lodged a criminal complaint against the founders and the CFO under sections 420 (cheating), 406 (criminal breach of trust) and 120B (criminal conspiracy) of the IPC, which was dismissed by a trial court earlier. He had then filed a revision petition before sessions court.

According to his complaint, Dua, an engineer and entrepreneur, founded portals marketsdelhi.com in 1999 and indianretail.net in 2005 and brought the benefits of digital technology to the retail community.

Few months before, a similar incident with Stayzilla’s co-founder Yogendra Vasupal’s arrest in Chennai on a complaint by a marketing vendor had sparked fears among Indian entrepreneurs.

Snapdeal had signed a three-year sponsorship contract with Dream Merchants, which organises the Bangalore Fashion Week, for six editions in July 2015, Feroz Khan, founder of Dream Merchants.

The online retailer stopped responding to calls and invoices 15 days before the Bangalore Fashion Week in January 2016. “We had to put in our own money and continue with the event with the Snapdeal branding,” Khan said.

The event management company then approached the court. According to the three-year contract ending in 2018 for the biannual event, Snapdeal was supposed to put in Rs 23 lakh for the first two editions, said Khan. Snapdeal then promised to pay another Rs 75 lakh for title sponsorship, he said.

The Bengaluru court issued summons to Snapdeal executives to appear before May 27. The case has been filed under Section 420 (cheating) and Section 120B (criminal conspiracy) of the Indian Penal Code (IPC). Reportedly, Snapdeal caused a “huge loss to the complainant” by cancelling the sponsorship contract.

This is not the first time Snapdeal has been in the news for allegedly not paying dues. In February, All India Online Vendor Association (AIOVA), which represents 2,000 sellers on different e-commerce platforms, wrote a letter to Commerce Minister Nirmala Sitharaman over the e-tailer not paying some of its sellers.

Dua says he met Ajmera at broadcast firm NDTV Convergence, where both used to work before Ajmera left for Snapdeal. In 2010, Ajmera helped him create a business plan for the purpose of fund-raising and, in the process, gained access to the idea, Dua claims. According to him, Ajmera interacted with him for nine months over 2010 and 2011 to extract trade secrets.

Dua further claims that Ajmera made him meet an investor with doubtful credentials in January 2011, but Dua didn’t divulge many details. Ajmera, however, said the investor ‘Yogesh’ needed more clarity to invest, Dua says.

At that time, Snapdeal, run by Jasper Infotech Pvt. Ltd., pivoted from a deals and coupons site to a marketplace in September 2011. “Snapdeal.com was operating as a daily deals site, an absolutely different business model. However, Ajmera, Bahl and Bansal used the opportunity to launch a new business based on my plans, which they had fraudulently taken from me,” says Dua.

Dua claims that when he confronted Ajmera on the matter, the latter offered compensation and a job at Snapdeal with stock options. “Between 2011 and 2014, they said they would help me raise funds, and that I could get a job with stock options as compensation,” he says.

However, when communication from Ajmera and Bahl started getting infrequent, says Dua, he became suspicious and realised he had been defrauded.

“We went to police in December 2014 but they did not do anything. Then, we went to court and it asked the police to submit a report. Then the trial happened. Four months down the line, the court also took cognizance of cheating under Section 417,” he says.

The first plea, for cheating, fraud and intellectual property rights (IPR) infringement, was rejected by the court in December 2016.

“IPR infringement was on part of Snapdeal and not others [other e-tailers], as they have evolved the model to suit themselves….But they [Snapdeal] have extracted from me how to go about it in a criminal fashion,” Dua says.

Dua then filed a fresh petition for cheating, fraud and breach of trust in March 2017, which the court accepted.

“The allegations made in the revised petition filed by Mr. Gaurav Dua are absolutely baseless and devoid of any merit. A previous complaint filed by Mr. Dua in this regard has been dismissed by the competent court and was found to be baseless and without any merit…The revised petition is an abuse of the process of law and has been filed with malicious intent to harm the reputation of the named individuals. The company intends to take all legal remedies against Mr. Dua in this regard,” a Snapdeal spokesperson said.

Indianretail.net is not functional anymore. Dua now works as a consultant for multiple projects. Prior to this, he also worked as chief marketing officer at roadside assistance provider Cross Roads India.

After spending six years at Snapdeal, Ajmera left the e-tailer in June 2016. He is currently co-founder and CEO of FundsCorner, a digital lending platform that provides working capital to small businesses, his LinkedIn profile shows.

The hearing comes at a time when the beleaguered e-commerce firm is already grappling with numerous seller complaints, and a merger with Flipkart seems imminent.

Last week, VCCircle reported that scores of seller disputes can be traced to data discrepancies in Snapdeal’s seller management function, including data loss and technical bugs.

Prior to that, Bangalore-based apparel-seller Rajdhani Cotton filed a petition with the commissioner of police, Delhi, alleging that that the e-commerce marketplace owes it Rs 67.6 lakh for business transactions between April 2014 and April 2016, but it has withheld payments “in a fraudulent manner.”

Last month, 11 Snapdeal executives, including co-founder Kunal Bahl, were summoned by a Bangalore metropolitan court over a complaint filed by an events company also, is called Dream Merchants Pvt. Ltd. has filed a compliant against the company for non payment of dues of up to $38.4K (INR 25 Lakhs). Last week Sameer Parwani CEO and co-founder of CouponDunia, took to social media to express his concerns about non payment by Snapdeal alleging that company has months behind on their payment.