Imagine a situation where you are the founder of a company that is in talks for acquisition with a larger firm. Amidst agreeing on terms with the acquirer, you draw the attention of a celebrated startup led by poster boys of Indian startups.
Sensing a bright future with the latest offer, you decide to go with it, dumping the previous one. After agreeing to the term sheet, founders and employees officially started working for the upcoming Unicorn. However, soon, you realized that the entire acquisition offer was a farce.
In fact, you start realizing that you’re probably being taken for a ride. In this case, Book Your Game was acquiree, and Cure.fit was the acquirer. According to the plaint submitted with Bengaluru City Civil court by Book Your Game (BYG), the company was in talks with Medfit for acquisition.
The company was convinced with the offer and signed a letter of intent for the deal in February with Medfit. BYG was valued at Rs 30 crore and was offered to 14% equity in Medfit as well. While the agreement with Medfit was underway, BYG was persuaded by Shan MS (executive Cure.fit) with an acquisition offer from Cure.fit.
Shan allegedly convinced BYG’s founders – Devi Prasad Biswal and Avijeet Alagathi that the company and team will have a promising future with Cure.fit. He also insisted the duo to call off the deal with Medfit as they’d have a better outcome at Cure.fit.
According to the documents filed in court, Cure.fit proposed Rs 2,70,00,000 worth of equity and Rs 30,00,000 cash to BYG’s founders and promoters. Besides ESOPs worth Rs 1,60,00,000, it also promised Rs 40,00,000 cash bonus to the employees. Both companies agreed upon the terms for the transaction in the last week of May, and Cure.fit finalized term sheet on June 10.
Following the agreement, Shan and other employees of the Accel-backed company asked team BYG to join Cure.fit in early June. Finally, they joined on June 12 after a half-day long induction session. The Mukesh Bansal-led firm also asked outstation employees of BYG to come down to Bengaluru for induction. BYG’s executives were also provided with email addresses with domain name @cultfit.in and were directed to use only those emails for official correspondence.
The transaction which was supposed to get completed by the third week of June ended up taking more time, and BYG had to pay salaries of June to its employees. To facilitate salaries, Cure.fit proposed Biswal, Alagathi and other BYG employees to sign a consulting agreement during the last week of June.
Cure.fit then paid the salaries of six employees including two co-founders and four technical staff but it didn’t pay for the other 14 BYG’s employees. The company also didn’t pay for the travel and accommodations for BYG’s outstation employees as it promised.
(Source: Plaint and documents filed by BYG with the Civil Court)
Biswal and Alagathi were trying to facilitate salary for remaining employees, but the duo got a jolt in the second half of July when Cure.fit declined to go ahead with the transaction. After saying no to the actual deal, Cure.fit offered a lump sum of Rs 50 lakhs as compensation in an email dated July 17. They also offered an additional Rs 35 lakh as acquihire fee in case the CTO, and sales head agree to join the team at Cure.Fit.
Doesn’t this amount to cheating?
While Entrackr is not aware of the exact episode, documents filed in court by BYG certainly reflect Cure-fit in a bad light. Why did the company wait this long for calling off the deal? Cure.fit had already given the term sheet to BYG, and the latter’s team also joined and worked for it for more than a month.
What was the motivation for engaging BYG for over two and a half months? Probably because Cure.fit has been planning to launch a new product – Gym.fit which has a similar model to BYG. According to the court documents, Mukesh Bansal had sent an internal email to employees: Gym.fit will aggregate gyms across the country.
BYG alleged that Cure.fit had gained highly confidential materials such as business model, technical know-how, product specifications, and other critical information. BYG alleged that Cure.fit copied its product and intentionally walked out from the deal in the court.
Subsequently, the court had granted a temporary injunction restraining Cure.fit from using the BYG model and launching/introducing/promoting any product or services similar to the ones offered by BYG including launching any product by the name of Gym.fit, CultX, or Sports.fit in any manner.
The court also barred Cure.fit from providing subscription-based products for accessing or booking of any fitness/activity centers or gyms including classes in any form.
After reading 241 pages long civil suit filed by BYG, it appears that founders, investors and employees may have been cheated and defrauded. Founders must have been lamenting about passing off the previous deal with Medfit. They anticipated that selling of BYG to Cure.fit would end up in a better outcome for everybody involved. However, it seemed to be otherwise.
Nevertheless, the truth will only be revealed after completion of judicial process which would take time. Till then wait. We would keep an eye on how this episode evolves in the court.
Entrackr has tried speaking to Cure.fit as well as BYG for comments. However, they declined to comment as the matter is subjudice.