Jabong ex-executives may face legal action

Rocket Internet-backed Global Fashion Group (GFG) is likely to take legal action against the former top executives of its fashion portal, Jabong, sources said.

This is after a forensic audit it commissioned had alleged several violations of corporate governance norms by founder and former managing  director Praveen Sinha, ex-chief executive Arun Chandra Mohan and former Rocket Internet India managing director Heavent Malhotra.

The report, reviewed by Business Standard, was prepared by international consultancy PricewaterhouseCoopers (PwC) to assist GFG in reviewing allegations from a whistleblower.

The sources say GFG is speaking to its legal team and might be filing a civil, as well as a criminal, suit in the next few days. “Action would be taken against all guilty parties,” said a source at GFG.

Based on the report, ‘Project Flush’, senior executives at GFG alleged major areas of conflict of interest on the part of Sinha. The report alleged Sinha had and still has significant and various business interest in service providers tied to Jabong.

It says Sinha carried out a transfer of Jabong’s logistics unit to an entity called Quickdel, in which he afterwards had a 50 per cent stake, of which a chunk was sold to online marketplace giant Snapdeal and other promoters.

“There are a number of questions that need to be answered, such as who signed off on spinning off GoJavas to Quickdeal. How was the share distribution decided? GFG is looking into all these aspects and soon the next course of action would be decided,” added the source.

Following reports of the stake sale to Snapdeal, Oliver Samwer, one of the founders of Rocket Internet, wrote a scathing e-mail to Sinha and Mohan, in which he threatened them with legal action.

“More and more news is coming out about our company, GoJavas, in the press and from our investor community.... I think we are concerned currently that we are not properly treated here and are not getting the share we should own...if there is no clear progress, I think we need to prepare legal action against everyone who was involved in stealing the business away from us,” went excerpts from the mail that were used in the audit report.