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The legal developments around Stayzilla founder Yogendra Vasupal create "fear" in the minds of aspiring entrepreneurs and could be detrimental to the 'Start up India' initiative, industry body CII said today.
Vasupal, co-founder of travel-based startup Stayzilla, was arrested this week for alleged non-payment of dues to a Chennai-based advertisement agency.
"The legal developments around Yogendra Vasupal, founder of Stayzilla is disturbing. The nature of the accusation invoked against Stayzilla, i.E. Non-payment of dues, essentially falls in the domain of civil disputes and not under criminal charges, unless it is done with an intent of cheating," CII Start-up Council Chairman Kris Gopalakrishnan said.
He added that startups are prone to all kinds of financial vulnerabilities like any other business, and such examples of criminal proceedings against startups create fear in the minds of aspiring entrepreneurs.
"Startups which fail should ideally be treated by a separate 'exit/bankruptcy law' or civil laws, and not criminal laws, which is also in line with the goal of 'Start up India'," he said.
Entrepreneurs across the country have supported Vasupal, saying laws need to be followed but any action "beyond the provisions of law would raise insecurity for startup founders".
Flipkart Co-Founder Sachin Bansal tweeted: "Let the law take its course, but intimidation of #stayzilla founders crosses a line. Its unhealthy for entrepreneurship in India."
Naveen Tewari, founder of InMobi, had also tweeted, "Entrepreneur bachao, Desh bachao. @InMobi provides full support to @stayzilla Founder!".