The National Company Law Tribunal has ordered the initiation of corporate insolvency resolution process (CIRP) against Rahul Yadav’s Broker Network (4B Networks Private Limited) after a petition by a non-banking financial company (NBFC) over unresolved INR 1.2 Cr debt.
Kolkata and Mumbai-based NBFC Krishkan Investment Private Limited filed the petition under section 7 of the Insolvency and Bankruptcy Code, 2016.
In an order on January 12, 2024, the NCLT’s Mumbai bench admitted the petition filed by Krishkan Investment, which is the financial creditor in this case, but not the original lender to 4B Networks.
As per the petition submitted to the NCLT, 4B Networks (Broker Network) borrowed INR 3 Cr from Ace Housing and Construction Private Limited as an Inter Corporate Deposit or corporate loan facility at a simple interest of 24% per annum in January 2023.
After securing the funds, 4B Networks repaid INR 2 Cr on May 1, 2023 and another amount of INR 20 Lakh on May 03, 2023, but a total of INR 1.09 Cr was left unpaid. By August 2023, the amount had ballooned to INR 1.20 Cr, and the insolvency petition was filed over this outstanding due.
The corporate loan was then advanced by Ace Housing to Krishkan Investments in July 2023. The NBFC was tasked with recovering the loan, but despite communication with Broker Network, the NBFC alleges that a default on the loan looked all but certain.
Ace Housing’s Links To Rahul Yadav
Incidentally, when Inc42 exposed Broker Network’s web of related party transactions and directorships, Ace Housing figured as one of the partners for Broker Network, with Ace Housing’s director Danishmand Merchant being the common link.
Merchant was a business partner in Yadav’s other companies, and also the owner of several properties rented out by Broker Network.
Former employees of Broker Network told Inc42 that Ace Housing knew the company’s financial situation better than most. The loan facility was given despite the business all but shutting down in early 2023.
The insolvency proceedings are likely to disrupt existing lawsuits and other proceedings against Broker Network. The NCLT’s filing says the bench “prohibits the institution of suits or continuation of pending suits or proceedings against the corporate debtor [Broker Network] including execution of any judgement, decree or order in any court of law, tribunal, arbitration panel or other authority”.
Besides this, the NCLT has barred Yadav’s Broker Network from “transferring, encumbering, alienating or disposing” of any of its assets or any legal right or beneficial interest. It has also barred any action seeking to foreclose or forcefully recover any interest pending by 4B Networks in respect of its property dues.
Legal Tangle For Rahul Yadav, Broker Network
We have reported that CEO and cofounder Yadav and many of the company’s other employees have been named in at least one first information report (FIR) at the Economic Offences Wing.
The FIR for alleged non-payment of dues and subsequent INR 10 Cr fraud was filed by Vikas Nowal, country head and cofounder of Interspace Communications, one of the many vendors that the troubled startup had not paid since mid-2022.
The second complaint with the EOW was filed by Broker Network’s chief backer, Info Edge, alleging fraud of INR 288 Cr, which we reported in October last year.
Besides Rahul Yadav, Info Edge’s complaint to the EOW names 4B Networks Private Limited, and cofounder and director Pratik Chaudhary as well as Devesh Singh (Yadav’s brother-in-law), Yadav’s wife Karishma Khokhar, and RY Advisory LLP, the partnership firm which was set up by the Broker Network founder.
Key employees and business heads involved with Broker Network such as Sanjay Saini, Vivek Jagtap (former CTO), Ashish Chandna, and Manish Agrawal have been named as co-accused in the complaint.
Besides this, Mumbai Police put out a warrant against Yadav, who pleaded not guilty to charges in a private complaint over a bad cheque case in Mumbai filed by former Broker Network employee Arun Singh Shekhawat in May 2023. Yadav is currently out on bail in this case after paying a guarantee amount of INR 5,000.
As detailed in our original investigation into Broker Network, these individuals are alleged to be linked to a network of companies that allegedly syphoned off funds from Broker Network for personal gains.
It is not yet clear whether the NCLT insolvency process will result in these investigations being put on hold. Inc42 has reached out to the accusers and petitioners in each of these cases to understand if there has been any communication from the investigation authorities on the status of these probes. We will update this story as soon as we receive responses.
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