On one end Flipkart is reportedly acquiring eBay India to take on Amazon, while on the other Stayzilla co-founder and chief executive Yogendra Vasupal continues to stay behind bars. And is expected to stay in there a while longer as the Special Metropolitan Magistrate court for CCB-CBCID cases has denied his bail appeal, reports ET. This is the utterly glum state of the Indian startup ecosystem.

Since a police custody application is pending, bail cannot be given at this moment,

said judge MM Kabir in the court meeting.

Let us backtrack a little, to the time when Stayzilla announced its plan to shut down operations across the country and take some time off to soon relaunch with a pivoted business model. This decision didn’t play well with one of the company’s offline advertising vendor Jigsaw, who slapped charges of defrauding against them. It filed a complaint under Sections 420, 406 and 506(I) of the IPC against the co-founders, Vasupal and Sachit Singhi, saying that they are responsible for managing the affairs of the company. Jigsaw states that it still has pending dues of over Rs 1.7 crore for the services rendered.

About ten days ago, the fraud accusation, which is baseless at best, against the company led to the arrest of CEO Yogendra Vasupal by the Chennai police. This is, however, just one facet of the hubbub surrounding the hotel and homestay aggregator. The co-founder, in an email statement, has mentioned that Jigsaw had sought the support of a local MLA and hurled numerous threats and harassment claims at them. This sounds like a deep-rooted case of corruption from the get go but will result in degrading the image of the start-up ecosystem in India.

The start-up community, including the founders of several unicorns, have since rallied together and voiced their concerns over the impact this arrest will have on the complete bunch as a whole. Even Karnataka’s dynamic IT&BT minister Priyank Kharge also came out in support of Stayzilla’s troubled founder Yogendra Vasupal on Twitter but no positive action has been taken to date. Vasupal’s counsels are now working on the next course of action since the bail appeal has been denied.

More proof of innocence — from friends and family

While Yogendra Vasupal had already penned (a draft, published by someone else) a Medium blog post defending his arrest, his friends and family are now taking up the charge to further prove that these allegations are futile and baseless. Stayzilla CEO had earlier posted that he had been looking to adopt a new business model and reboot operations in the coming weeks.

But the regulatory framework, as well as corruption only work towards burying the hatchet — rather than giving it a second chance to stand. He also attached a video of their landlord (a politician) assaulting Vasupal and threatening to kill him in front of the admin staff, to which he had already filed an FIR with the police.

But Vasupal’s family and friends have now taken to Medium to voice their views, saying that the third-party ‘Jigsaw’ might be looking to extort their dues from them by his character assassination. They add that there is a divergence between truth and power, this being their attempt to shine a light on necessary facts to protect his identity. And an important thing to mention here is that Stayzilla started out by bootstrapping capital from these pupil.

The primary points they’ve highlighted in the same are  — utilizing their credit line from the bank to make online purchases of tools and software like GITHUB, AWS, JIRA etc, taking compensations much less than most of Stayzilla’s department heads, never selling their own stocks during a fundraising round (something Snapdeal co-founders have been accused of). It further added that Jigsaw has used the monthly rental payout in Vasupal’s father’s name to allege him of siphoning money from the company.

It [Monthly payout] is actually the monthly rental under a Rental Agreement for Yogi’s dad’s apartment that is Stayzilla’s registered office in R.A Puram, under Inasra Technologies Pvt Ltd since 2013 till date.

The friends and family have further been spooked by the behavior of Jigsaw, who has threatened Vasupal’s family and even sent out Voodoo dolls — black magic. They are currently plagued with “tremendous fear, anxiety & insecurity” and they have only one big fat question from the administration:

“HOW did a civil matter become Criminal?”, and if it is done to Yogi — it can be done to any entrepreneur(any one infact). This is a disputed invoice with the vendor for non-performance of services under dispute with the company.

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