Ex-Jabong executives investigated for alleged corporate governance violations

Former senior executives of Jabong are being investigated by Rocket Internet for apparent violation of several corporate governance rules, reports ET.

The report that also discloses an apparent “conflict of interest” during the GoJavas deal with Snapdeal cites well-known pseudonymous Twitter user ‘Unicon Baba’ who has leaked the interim summary of investigation code named- Project Flush.

Three former executives, namely Praveen Sinha (ex-MD, Jabong), Arun Chandra Mohan (ex-CEO, Jabong) and Heavent Malhotra (former Rocket Internet India managing director ) have 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.”

What does corporate intelligence audit report say about Jabong, GoJavas& Snapdeal? https://t.co/PAkLEVkmgN

— Unicon Baba (@uni_con1) July 15, 2016

The investigation carried out by Forensic auditor Pricewaterhouse-Coopers started after a whistleblower made allegations of financial impropriety in August last year.

Apparently, Sinha carried a fraudulent transfer of Jabong’s logistics unit to an entity called Quickdel. He later owned a 50 percent stake in Quickdel before selling shares to Snapdeal with other promoters.
Sinha, however, has denied any allegation imposed on him and has filed a legal case against the Twitter account holder for relaying damaging tweets on the Internet.

Sinha mentions that he has been unfairly accused of wrongdoing and in a statement to Mint, adds that, “Firstly, I have never been informed by Jabong’s investors of any PwC report. I came to know of it recently through a media query, to which I was not even given a day to respond. While it is very easy for any person/media to speculate and make false allegations, it is equally difficult for the subject of such allegations to prevent the damage and reputational loss he/she suffers on account of the same.”

The PwC investigation also raised doubts about 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. It was also found that a Jabong employee was a director at Value Shoppe. What is even more dubious is the fact that the address of Value Shoppe was same as the B2C entity of JabongXerion.

Though 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.”

Particularly noticeable here is the timing of these developments as they have come when both Jabong and GoJavas are in talks for sale. Snapdeal had approached GoJavas to buy it out completely but reports now suggest that GoJavas has now walked out of the negotiations.

Commenting on the ‘unfortunate’ timing of this leak and media outrage Sinha said that, “As regards the timing of the release, it is indeed extremely unfortunate that this issue is being sensationalized at a time when multiple positive developments were shaping up for the companies in question. I hope these developments will not be adversely impacted by the false and baseless news reports. I am sending you these prefatory thoughts as I am currently traveling.”