Once popular – and now defunct – ecommerce startup AskMe is breathing its last. The startup’s biggest investor, Malaysia-based Astro Entertainment Network (AENL) has filed a petition in the Delhi High Court to close down Getit Infoservices, AskMe’s parent company.
The move thwarts all efforts made by AskMe co-founder and CMD Sanjiv Gupta to prevent the ecommerce startup hitting insolvency. In the past, Sanjiv has repeatedly locked horns with Astro, blaming the investor for withholding funds, and eventually pushing it to the brink of failure.
Astro, on the other hand, has squarely put all responsibility of AskMe’s debacle on Sanjiv, citing an agreement signed during Astro’s entry that entrusts him with the functioning of management.
“The company could not meet its performance target as stipulated in the business plan and the company’s actual expenditure exceeded the budgeted expenditure,” states the petition filed by Astro. Tech in Asia has seen the papers.
Astro has urged the court to appoint a liquidator to shut the entire business “both on the grounds that it is insolvent and that it is just and equitable to do so.” The court was slated to hear the petition today, but has adjourned the session to January. It is likely to heed Astro’s demand, as it is the majority shareholder.
It may also designate a buyer, who will have to carry the burden of paying off Getit’s debts and liabilities that amounts to over US$80 million. As of July 2016, AskMe recorded losses of US$60.7 million.
“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 said in an email response. Sanjiv did not respond to repeated calls and emails from Tech in Asia seeking comments.
The blame game
The move to shut down AskMe is in line with Astro’s earlier statements where it expressed the need for a court-appointed liquidator to decide AskMe’s fate. Astro wants a third party liquidator to step in because of the stalemate between Getit board of directors – including Sanjiv, Sidharth Gupta, Ramesh Gupta – and the investor.
Astro says that the Getit board has resorted to hostility and has deliberately delayed and obstructed decisions related to the closure of the company. AskMe’s board of directors met in June 2016 for the last time before things turned sour. As per Astro, any further attempt for such a meeting “has been blocked by the promoter group.”
“The company is left with two directors but no board meetings can be conducted without leave of National Company Law Tribunal (NCLT) due to the proceedings instituted by Sanjiv Gupta,” Astro states in the petition.
Sanjiv approached NCLT in August, soon after AskMe suspended business, to penalize Astro for alleged mismanagement of the company, and of withholding payments. NCLT directed Astro to maintain status quo and not exit the ecommerce startup.
Sanjiv holds just 0.06 percent stake in Getit, while Astro has a 99 percent share in the company. Astro has invested over US$300 million in Getit since 2010, and has criticized AskMe for its inability to make its business profitable despite this investment.
Sanjiv, on his part, has approached Astro three times, latest being in September, with a management buyout offer. But Astro has rejected it all three times, saying the offer was “inappropriate.”
In the first buyout offer extended by Gupta in June, a copy of which is in possession of Tech in Asia, he offered Astro US$1 to buy out its majority shareholding in Getit, and demanded the investor to put in additional amount of US$30 million or US$50 million, as capital infusion.
Astro has been trying to dilute the business and recover its investment since July, even before the company officially suspended operations. But Getit management hasn’t been able to convince any third-party investor to step in. In June 2016 Credit Suisse, a subject matter expert, had confirmed that there were no interested investors in the company’s business, Astro states in the petition.
“The promoter group has laid serious allegations against the petitioner including physical and criminal intimidation, sexual harassment, and oppression, which the company has denied,” Astro goes on to add in the petition. Astro cites another finding from Alvarez & Marsal commissioned by the company’s board to carry out an assessment of the company’s business and financials. The report stated that Getit’s financial position was “weak”.
Citing a deep level of distrust between the shareholders and the management, the lack of funds and unlikelihood of a turnaround, Astro sought for the closure of AskMe.
The “winding up petition” is different from 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. It is not necessary that every company which is liquidated is bankrupt.
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