The battle between the board of Getit Infoservices – which operated popular ecommerce and listings website AskMe – and its majority investor Astro has reached a tipping point.
According to a court order reviewed by Tech in Asia, the Delhi High Court has directed the Serious Fraud Investigation Office (SFIO) to probe allegations of misappropriation of funds and company assets, a move that Astro has been lobbying for.
The SFIO will submit a report on AskMe’s finances by the end of this month. Malaysia-based Astro Entertainment Network (AENL) filed a petition in the Delhi High Court in December last year to close down Getit Infoservices, Tech in Asia had reported.
The court has also agreed to appoint a provisional liquidator to wind up the company that suspended operations in August last year.
A “winding up petition” is different from a bankruptcy filing. In bankruptcy, an entity or an individual can be given a fresh start, depending on the petition clauses. Bankruptcy is filed for when debts and liabilities are in excess of assets. Liquidation, on the other hand, refers only to companies, and means terminating all operations permanently. Not every company that’s liquidated is bankrupt.
Astro has invested over US$300 million in Getit since 2010. Astro’s contention was Getit’s huge debt, which amounted to over US$80 million. As of July 2016, AskMe recorded losses of US$60.7 million.
The court has subsequently ordered all the directors of the company, including managing director Sanjiv Gupta, to submit their statement regarding the investigation in the next few days. “The company and directors are restrained from alienating and encumbering, or otherwise parting with the possession of assets of the said company without the leave of this court,” the court order states.
The restrictions on the company directors was a response to Astro’s contention that the Getit board resorted to hostility and has repeatedly obstructed decision-making process regarding AskMe. The board of directors last met in June 2016.
The court’s stand is in direct conflict with Sanjiv’s efforts, who has repeatedly tried to prevent the startup’s insolvency. Sanjiv squarely blamed investor Astro for AskMe’s troubles. He accused Astro of withholding funds, which he claims was the sole reason that brought the startup to its knees.
Sanjiv holds just 0.06 percent stake in Getit, while Astro has a 99 percent share in the company. Sanjiv did not respond to calls and emails from Tech in Asia seeking comments.
Astro has defended its position by blaming Sanjiv for AskMe’s debacle, saying the CMD failed to utilize the funds appropriately, and was unable to make any profits even after 18 months of operation. Astro cites an agreement signed by Sanjiv in which he is entrusted with utmost responsibility for all AskMe operations and finances.
“The company could not meet its performance target as stipulated in the business plan and the company’s actual expenditure exceeded the budgeted expenditure,” Astro had said in the petition filed in December.
The court, in its order, acknowledged all the allegation laid down by Astro, and granted its plea since its the majority shareholder. “AENL is interested in assessing the events that led to the current state of the business, and will work with the court-appointed liquidator to carry out this exercise,” the investor had told Tech in Asia in an email response.
Sanjiv tried to save AskMe with three consecutive buyout offers to Astro, the latest of which was in September, but was rejected all three times because the offer was “inappropriate.” According to the documents read by Tech in Asia Sanjiv had offered to pay US$1 to Astro to buy out its majority shareholding in Getit. He also demanded that the investor put in an additional amount of US$30 million or US$50 million as capital infusion.
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