Co-founder of home-stay aggregator Stayzilla Yogendra Vasupal, who was arrested late on Tuesday night by the Chennai Police in an alleged financial cheating case, could not obtain bail on Wednesday. Vasupal was produced before the court in Chennai but his lawyers could not move the bail application, which is now expected to happen only on Thursday. For now, Vasupal will spend one more day in police custody, a rare situation for a startup community leader in India.
The alleged cheating case was filed by one of the company’s vendors, Jigsaw Advertising, an agency based in Chennai that claimed that there were unpaid dues to the tune of Rs 1.5 crore. Vasupal, in a blog post, contested the claims made by the advertisement agency and sought legal recourse. His blog claimed that there were bogus complaints framed against him and that he was surprised at the swiftness of action of the police.
Jigsaw Advertising founder CS Aditya, in response to these charges, said, “How long will advertising agencies and media houses bear losses because of irresponsible wannabe entrepreneurs who manage to get funding just to live a 5-star life for a few years and then finally shut shop and expect the hard-working small-time business people to suffer?”
The action against Vasupal received widespread condemnation from the entrepreneur community who expressed their support for Stayzilla, an 11-year-old firm backed by Matrix Partners and Nexus Venture Partners. Stayzilla had suspended its operations in February after a sustained struggle. Stayzilla, once seen as a leading player in the home-stay aggregator space, had received $34 million in venture capital. Karnataka IT minister Priyank Kharge tweeted on Wednesday morning that he himself will speak to his his counterpart in Tamil Nadu. Later, he communicated his concern on the matter. “Spoke to Dr Manikandan, IT minister for his intervention in Stayzilla case, I am sure he will help if Yogi Vasupal is on the right side of law.”
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Besides the minister, the founders of prominent companies such as Flipkart, Snapdeal, Inmobi and a host of angel and venture capital investors like Ravi Gururaj, Sharad Sharma and K Ganesh termed this as an unfair action while expressing their support. Flipkart’s founder Sachin Bansal tweeted, “Let the law take its course, but intimidation of Stayzilla founders crosses a line. It is unhealthy for entrepreneurship in India.”
In a surprising development on February 24, the Stayzilla co-founder in a blog post said that they were temporarily suspending their operations and sought time to reboot the company. This action was seen as a result of stretching the operations too wide without looking into the core metrics like cash flow and working capital. Stayzilla had reported revenue of R13.8 crore with a net loss of R95 crore for FY16. Besides the financial dispute case, the founders of Stayzilla alleged that they faced continuous threats from their landlord in Bengaluru, and the same has been detailed by Vasupal in his blog post with supporting video evidence. Though Chennai-headquartered, Stayzilla has moved its operation to Bengaluru a year ago.