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Rocket Internet launches investigation into ex-Jabong executives for alleged corporate governance violations

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According to a report in ET, Rocket Internet is investigating former senior executives of Jabong for violation of several corporate governance rules. The report also discloses an apparent “conflict of interest” during the GoJavas deal with Snapdeal.

The ET report cites famed Twitter user Unicon Baba who often reveals insider information about Indian startups. This time, Unicon Baba shared the interim summary of investigation code-named Project Flush.

The investigation started after a whistleblower made allegations of financial impropriety in August last year. Forensic auditor Pricewaterhouse-Coopers based in Sweden carried out investigations on behalf of Rocket Internet.

Three former executives namely Praveen Sinha (ex-MD, Jabong), Arun Chandra Mohan (ex-CEO, Jabong) and Heavent Malhotra (former Rocket Internet India managing director ) reportedly violated the corporate governance rules and indulged in third party tradings.

The report says that the allegation of “collusive trading is partly supported, at least to the extent that conflict of interest situations apparently exist.”

Sinha apparently carried a fraudulent transfer of Jabong’s logistics unit to an entity called Quickdel. He later owned a 50% stake in Quickdel before selling shares to Snapdeal with other promoters.

Investigation also raised serious questions on transactions between Jabong and an entity called Value Shoppe Retail. It found that unsold inventory and factory seconds at Jabong were disposed at questionable rates and steep discounts to Value Shoppe.

Moreover, PwC investigators also found that a Jabong employee was also a director at Value Shoppe. What is even more interesting is the fact that the address of Value Shoppe was same as the B2C entity of Jabong Xerion.

Jabong confirmed about the investigation but said that no value transfers had taken place. In a statement, Jabong said,

All relevant parties had met on this matter and concluded that no value transfer has happened and hence all matters referred in the alleged report stand closed.

Notably, these developments have come at a time when both Jabong and GoJavas are in talks for sale. Snapdeal has emerged as a front-runner for both deals.

In fact, last week, the company intended to buy GoJavas completely but GoJavas has apparently walked out of negotiations. The latest reports of investigation may further affect the sale of Jabong and GoJavas.


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