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The SIAC refused to stay the investigation by BharatPe into the company’s operations and governance after Ashneer Grover’s appeal

The cofounder had alleged that the company conducted preliminary investigations in violation of the shareholder agreement

Earlier, Grover had also said that the company’s appointments for the governance review were biased in nature

BharatPe cofounder Ashneer Grover has reportedly suffered a major setback in his dispute with the fintech startup’s board and CEO, as the Singapore International Arbitration Centre (SIAC) has rejected his appeal to block a third-party governance review by the company.

A PTI report has claimed that the SIAC refused to stay the investigation by BharatPe into the company’s operations and governance under Grover, after several weeks of controversies.

Grover had filed an emergency appeal with the Singapore arbitrator earlier in February and had questioned the need for a governance review in his appeal. He had also claimed that a preliminary investigation conducted by the company was in violation of shareholder agreement and articles of association.

The first hearing on the arbitration reportedly took place on February 20, with the SIAC passing the rejection order last week.

BharatPe vs Ashneer Grover: Who Has The Advantage?

While this is far from the end of the bitter stake battle between the two parties, the company might eventually get its way and force Grover to relinquish his stake due to financial misconduct. Following this rejection, Grover is likely to approach the Delhi High Court in appeal. Before the SIAC’s panel, he was represented by Karanjawala & Co, while senior advocate Abhishek Manu Singhvi appeared for BharatPe.

The SIAC could still have intervened and perhaps brought some relief to the Grovers, but that did not go in favour of the duo.

But BharatPe has now seemingly got the advantage after the SIAC’s rejection of the appeal. As per a report by Moneycontrol, BharatPe’s lead counsel Singhvi said he was “most impressed with the speed and diligence with which emergency hearings were taken up and decided in record time, despite a host of issues involved”.

In his appeal, Grover further alleged that the appointments made for the independent audit were mala fide and that members of the committee reviewing governance processes, including the CEO Suhail Sameer and the company’s general counsel Sumeet Singh, are biased against the subject of the investigation.

Besides Sameer, the Grovers have also squared off with former BharatPe cofounder Bhavik Koladiya, who is now the product and engineering lead at the company. Till 2018, Koladiya held over a 30% stake in the company, which was later diluted in subsequent rounds as more and more VCs backed the company. Over its past four funding rounds, the equity held by VC funds in BharatPe has grown from 16.7% to 66.1%, A bulk of the Koladiya’s shares were sold to VC investors in these rounds.

Koladiya was convicted in a credit card fraud case in the US. While his conviction and subsequent sentencing as time served in the US does bar him from holding directorships in US-registered companies.

Last week, Jain Grover had alleged that Koladiya is a third-party vendor, yet he’s been given a seat in discussions around the situation at BharatPe. She claimed that Koladiya along with BharatPe board chairman and former SBI chief Rajnish Kumar were trying to squeeze the Grovers out.

How The BharatPe Saga Has Played Out

It all started with a legal dispute against Kotak Mahindra Bank over IPO financing, following which an expletive-filled conversation involving Grover and a Kotak employee was leaked on Twitter in late 2021. In January, Grover announced that he was going on a voluntary leave of absence, but this was nothing but window dressing given the volume of allegations that have followed.

Public pressure on BharatPe meant the company initiated independent audits into its financial operations as well as governance. One review conducted by Alvarez & Marsal (A&M) is said to have revealed impropriety including embezzlement involving Grover and his wife Madhuri Jain Grover, who was also head of controls at BharatPe. This report has not yet been confirmed by the company and the Grovers then questioned how details about this were leaked to the media.

Besides A&M, PricewaterhouseCoopers (PwC) is also involved in the independent audit.

Amid this furore, Grover claimed in public that he is willing to part ways completely with BharatPe if the board agrees to buy back his 9.5% stake for a sum of INR 4K Cr, at a valuation of $6 Bn. Of course, the company has not entertained this demand and reports indicated it is in talks with investors to raise funds at a $4 Bn valuation.

Meanwhile, facing allegations of embezzlement and syphoning off recruitment commissions, Madhrui Jain Grover was dismissed by the company. She has alleged that her dismissal was unlawful and that she had never even resigned from her post. And last week, things came to a head when she alleged that BharatPe had enabled a sexist work culture.