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Investors rarely turn against the founders they back, but Info Edge (India) Ltd has taken an unusual step. Last week, the consumer internet group filed a first information report (FIR) against Rahul Yadav, founder of its portfolio company 4B Networks, and several key executives, alleging misuse of company funds. Those named in the FIR include Devesh Singh, Pratik Choudhary, and Sanjay Saini While clarified in an exchange filing that the move would not materially affect its business operations, the FIR signals a rare showdown between an investor and a portfolio company founder.
breaks down the development. What led to the FIR? The dispute dates back to early 2023, when 4B Networks, a real estate-focused platform led by Yadav, failed to provide critical financial information requested by Info Edge, which owns a 65% stake in the company. By June 2023, Info Edge had initiated a forensic audit following repeated failures to obtain financial details and disclosures about related-party transactions.
Despite investing 280 crore in 4B Networks—including 275 crore in equity and 12 crore as debt—the company faced financial turmoil, defaulting on salaries and vendor payments while exhibiting glaring lapses in corporate governance. These issues escalated as Broker Network, operated by 4B Networks, teetered on the brink of collapse. Info Edge eventually wrote off its entire 280 crore investment, citing an inability to recover confidence in the firm’s financial health.
The FIR, filed last week, alleges fraudulent misuse of funds by Yadav and his associates. Who is Rahul Yadav? Rahul Yadav rose to prominence in 2012 when he founded Housing.com, securing 550 crore in a funding round led by Japan’s SoftBank just two years later.
However, his meteoric rise was marred by controversies, including confrontations with investors. In 2015, the IIT-Bombay dropout reportedly sent an angry email to Shailendra Singh, managing director of Sequoia Capital (now Peak XV Partners), accusing him of unethical practices, which triggered a public fallout. Yadav’s behaviour toward employees and investors eventually led to his ouster from Housing.
com in 2015. His subsequent ventures, such as Intelligent Interfaces, also faced governance and financial management challenges. At 4B Networks, Yadav attempted to secure additional funding, including a 50 crore investment proposal from a Dubai-based property dealer.
However, the offer came at a drastically reduced valuation—99% lower than the prior funding round—further straining relations with Info Edge, which had flagged concerns about financial transparency and cash burn. What are the implications of this case? The FIR underscores the growing emphasis on corporate governance and accountability in the Indian startup ecosystem. According to Jasmine Damkewala, senior partner at Circle of Counsels, the move highlights Info Edge's commitment to transparency within its portfolio companies.
It may also help the firm recover a portion of its investment while safeguarding its reputation. For Yadav, however, the outlook is less certain. “The allegations of fraudulent activities could damage his reputation and impact his future entrepreneurial venture and may raise serious concerns among investors and stakeholders which should make it very difficult for him to ever obtain funding for any new venture," Damkewala said.
Manmeet Kaur, partner at Karanjawala & Co., added that the Economic Offences Wing or an investigating agency would need to prove the alleged misuse of funds and suspicious financial transactions. “The agencies would be required to establish money trail and link the person to the siphoning.
" Have there been other similar cases? While this is one of the first instances of an investor filing an FIR against a portfolio company, corporate governance lapses in India’s startup ecosystem have triggered several legal cases in recent years. In 2022, ’s parent company filed a case with the Economic Offences Wing (EOW) against former managing director Ashneer Grover and members of his family, alleging financial misconduct. The case escalated into a broader dispute, leading to the EOW filing a FIR.
By September, the fintech startup dropped the legal action and reached a settlement with the Grovers. Last year, car servicing startup GoMechanic faced similar challenges when its early investors, including Peak XV Partners, Orios Venture Partners, and Chiratae Ventures, filed a complaint with the Haryana Police’s EOW against its founders, alleging fund misappropriation. Fashion e-commerce startup Zilingo faced internal turmoil when co-founder and ex-CEO Ankiti Bose filed a criminal complaint against fellow founder Dhruv Kapoor and ex-COO Aadi Vaidya.
She accused them of cheating, criminal intimidation, conspiracy, and harassment, alleging they misled her and investors to gain financial advantages and coerced her into giving up her shares and business under false pretences. ’s is also embroiled in legal disputes after a group of early investors approached the National Company Law Tribunal, raising concerns about governance failures, financial mismanagement, compliance lapses, and changes in leadership earlier this year. While Byju’s does not have a criminal history, multiple investigations are still underway.
The FIR against Rahul Yadav marks a turning point in India’s startup ecosystem, underscoring zero tolerance for financial misconduct and setting a precedent for investor-founder accountability..
