The start-up system in Tamil Nadu will be impacted if civil cases are treated as criminal and officials of corporates are arrested for vendor dues, said officials of The Indus Entrepreneurs (TiE) Chennai.
They were in support of online homestay market place Stayzilla founder Yogendra Vasupal, who was arrested here on Tuesday for not settling the dues of an advertising agency.
"This is bad in law and reflects badly on law and order in Tamil Nadu. The case is a civil case-non-payment to vendor," P. Narayanan, President of TiE Chennai, told reporters here on Wednesday.
He said banks have huge non-performing assets (NPA) and it would be a ridiculous situation if the industrialists were taken to police station.
According to K. Purushothaman, Regional Director of NASSCOM, the start-up eco system in Tamil Nadu would be impacted due to this development.
Stayzilla had shut down operations last month.
One of the vendors, a city based advertising agency Jigsaw Advertising, lodged a police complaint against Vasupal for non-payment of dues.
"The due process of law seems to have taken a total backseat. Who would want to battle against bureaucracy on the one hand, corruption on the other hand and total law and order breakdown on the third? Even as we speak, the accused (Vasupal) has not been given a copy of the FIR and is unable to apply for bail today," Narayanan said.
In a statement issued in Delhi, the Internet and Mobile Association of India (IAMAI) has strongly urged the Tamil Nadu government to release Vasupal and withdraw the FIR against him.
Referring to Vasupal's statement, IAMAI said there was no personal fraud involved in this case and this was a corporate matter and he had only signed on behalf of Stayzilla.
Therefore, prima facie, it seems that a criminal FIR against him was not tenable.
According to IAMAI, such a criminal case against a signatory of a corporate Pvt Ltd Co for a corporate liability is unprecedented and unheard of.
If this becomes a norm, then the start-up ecosystem in India will suffer and the Indian government's vision of 'Start-up, Stand-up' vision will take an enormous hit.
IAMAI said prima facie Chennai Police had deliberately acted in bad faith by resorting to legal overreach.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)