PhonePe, a digital payments company, filed a formal complaint with the Securities and Exchange Board of India (SEBI) on Saturday, accusing Ventureeast of engaging in “side deals” with Affle in order to torpedo its majority acquisition of IndusOS.
This SEBI action in India is in addition to a lawsuit brought by PhonePe in Singapore High Court against Ventureast Proactive Fund-II (VPF) and Affle.
The lawsuit claims that VPF deceived PhonePe by continuing to work with PhonePe and OSLabs, the parent company of IndusOS, on the sale of its stake in OSLabs in favour of PhonePe despite selling those same shares to Affle in a side deal without OSLabs’ or PhonePe’s knowledge during a legally binding no-shop period.
Last month, Flipkart-owned PhonePe was in advanced discussions to buy IndusOS, a locally developed app store, for $60 million in cash. However, Affle, a mobile marketing platform, filed a lawsuit against PhonePe and OSLabs in the Singapore High Court shortly after, objecting to the arrangement.
The Managing Partner, General Partner, and Principal of VPF engaged in this transaction have been and are continuing to make severe misrepresentations, including a series of unethical and bad faith conduct, as well as potentially criminal conduct, according to PhonePe’s complaint to SEBI.
‘’As founders, we are always held to the highest standards of legal and ethical integrity by our investors. But these standards should apply to investors in startups too. I believe in this case, VPF has not only broken SEBI’s code of conduct, but it has also acted in complete negligence of its fiduciary duties as a large shareholder of IndusOS. By deliberately derailing PhonePe’s acquisition of IndusOS, a deal which all three OSLabs founders continue to also believe is in their company’s best long-term interests, VPF has also hurt OSLabs’ long term interests,” aid Sameer Nigam, chief executive and founder PhonePe.
For the benefit of the greater startup environment, we feel it is critical to expose VPF’s unethical behaviour. We have a good case and are optimistic that we will triumph on both fronts, perhaps creating a significant deterrence for unscrupulous actors attempting to harass small firms,’ Nigam added.
While the legal issues will be resolved in court, PhonePe believes that SEBI would investigate VPF’s serious ethical breaches and breach of fiduciary obligations in order to defend the interests of OSLabs, its investee firm.
