Ministry of Corporate Affairs to Investigate BharatPe saga

The central government has decided to launch an investigation into suspected corporate governance failures at BharatPe, a fintech startup.

The preliminary investigation, which will be performed by the Ministry of Corporate Affairs (MCA), would be in the nature of a fact-finding exercise for the time being.

“The MCA has the power to call for information, inspect books and conduct inquiries in issues that involve shareholder and investor interest” the source noted. The investigation would take into account the conclusions of recent audit reports ordered by the BharatPe board of directors.

The BharatPe story began with a leaked audio clip purportedly showing Ashneer Grover, the company’s co-founder and managing director, abusing a Kotak Mahindra Bank staff for failing to gain them a preferred share allotment in Nykaa’s initial public offering. Grover issued a legal notice in response to the disclosure, inviting the bank to reply. Grover’s public relations nightmare was exacerbated when information of a prior feud with the company’s main shareholder, Sequoia India, became public.

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At the same time, the BharatPe board of directors appointed management consultancy and risk advisory firm Alvarez and Marsal (A&M) and accounting firm PwC to perform independent audits into alleged fund theft and corporate governance issues under Grover.

Grover’s wife Madhuri Jain, her brother Shwetank Jain, and brother-in-law Deepak Jagdishram Gupta were allegedly involved in irregularities with recruiting and bogus invoicing, according to a preliminary study by A&M. According to the inquiry, five employees were hired through various consultants and were paid to recruit costs, despite the fact that the employees denied being employed through the consultants named on the invoice.

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According to the investigation, Jain got invoices directly from vendors in three of these situations and transferred them to the account divisions for clearance. Payments were also made to non-existent merchants, according to the allegations.

Grover resigned after being “baselessly targeted by a few individuals” and “vilified and abused in the most humiliating manner,” according to Grover, who had moved the Singapore International Arbitration Centre to avoid a board probe.

The fintech firm responded by stating that it reserves the right to take action in response to the contents of the investigation.

“Ashneer Grover resigned as BharatPe’s Managing Director and Board Director minutes after receiving the agenda for the impending Board meeting, which included the submission of a PwC report on his conduct and consideration of steps based on it.”

Source: Business Today