It's Ashneer Grover Vs BharatPe As Probe Raises Questions On Recruitment, Missing Vendors

An investigation initiated by Alvarez & Marsal into governance and internal processes at payments firm BharatPe has revealed two areas of concern in initial investigations. A final report is yet to be presented to the BharatPe board.

Two aspects the investigations looked into is the process followed to hire external consultants for recruitment at BharatPe and instances of vendor invoices being allegedly fake. BloombergQuint has reviewed parts of the Alvarez & Marsal's report on these claims but has not accessed its full and final findings.

The Mint newspaper first reported on these findings on Friday. Queries mailed to BharatPe, Alvarez and Marsal and co-founder Ashneer Grover on Friday remained unanswered.

One part of the investigation looks into impropriety in the recruitment processes followed at BharatPe, where so-called "consultants" were involved. In FY20, payments worth Rs 1.98 crore and Rs 1.79 crore were made to two of these consultants, the findings alleged.

The investigation tried to verify the authenticity of the invoices raised by these consultants and found that in at least five cases employees said to have been hired through these services denied knowledge of ever working with the consultancies.

The investigation alleged that invoices raised by some of these consultancy firms have commonalities such as same typeface, same sort of email addresses, similar physical addresses, similar formats, some having the same bank branches, etc.

The report pointed to the likely direct involvement of a few people in the recruitment process. BloombergQuint is not naming them since we have not been able to reach them directly.

The Missing Vendors

The investigation also looks into invoices generated by other vendors. It noted that the Directorate General of GST Intelligence had conducted searches at BharatPe's head office on Oct. 21, 2021.

The searches looked into copies of purchase invoices by a set of 30 vendors and bank statements since July 2018 reflecting payments made to these vendors. The DGGI summoned the authorised signatory at BharatPe to appear on Nov. 1, 2021 with these documents.

On Nov. 11, BharatPe purportedly sent a letter to the DGGI, signed by a company official, stating that the company has come to know that some of these vendors did not exist or never operated at their principal place of business. It sought a waiver of the show cause notice in the matter.

The expenditure toward these 30 vendors could be as high as Rs 53.25 crore, the initial findings allege. BharatPe reversed the input credit related to these vendors and also paid a penalty in this matter. Cumulatively, the loss to the company in this matter was nearly Rs 11 crore, the report claimed.

The final outcome of the DGGI investigation is not known.

Alvarez & Marsal also reviewed sample invoices related to these vendors where it found some inconsistencies, such as the author of these invoices being the same, common layout of the invoices, common proprietor names across some of these missing vendors.

The report calls for further investigation into why BharatPe was dealing with these non-existent vendors, why it was not able to provide adequate proof of delivery of materials by these vendors and why the company settled the alleged matter with DGGI without engaging any legal representation or initiating recovery proceedings against these vendors.

The initial findings of the investigation come at a time when Ashneer Grover has gone on voluntary leave, at least till March 31. In an interview with BloombergQuint, Grover denied any governance concerns at BharatPe. He also denied allegations of fake invoices.

According to him, the company's finances were regularly audited by Deloitte, which is among the 'Big 4' accountancy firms. He also said the company's finances were further under scrutiny during the due diligence conducted by its investors.

"I have always put the highest governance standards in the company... Even though we are not required to, going beyond the standards of even a listed company, all our financials are reported by the fifth of the following month, every month. So from an overall governance perspective, we can comfortably say that we are following the highest forms of governance, even though we are not required to" Grover had said.

Seeking Ouster Of CEO?

According to a person with direct knowledge of the matter, Grover has also written to the board seeking the removal of BharatPe CEO Suhail Sameer from the company's board.

In a letter addressed to the board dated Feb. 2, Grover has invoked his powers under BharatPe's shareholder agreement, and stated that he is withdrawing his nomination for Sameer's appointment on the board. In addition to being the CEO, Sameer was jointly nominated by Grover and BharatPe's other co-founder Shashvat Mansukhbhai Nakrani as a nominee director, according to the letter.

Grover has requested the board to proceed with necessary processes to record the cessation of Sameer's directorship.

A specific query on this was sent to BharatPe and Grover, where responses are awaited. Sameer did not respond to calls.