The BharatPe breakup: what a founders' agreement would have changed

On 2 July 2018 Ashneer Grover acquired 3,192 shares in Resilient Innovations Pvt Ltd, the company behind BharatPe, where he was managing director until 2022. The price was the ₹10 face value: 2,447 shares came from co-founder Shashvat Nakrani for ₹24,470 and 745 from co-founder Bhavik Koladiya for ₹7,450, or ₹31,920 in all.

Nakrani sued Grover in March 2023, saying he had never been paid. "After the stock split, the 2,447 shares are now 24,470 shares with each share valued at about INR 4 Lakh," he said, as quoted by Inc42 on 23 March 2023. Grover says he paid in cash. In February 2024 Inc42 put the same shares at ₹500 crore, a later estimate well below the roughly ₹979 crore that Nakrani's figure implies.

By the time Nakrani sued, BharatPe was suing members of the Grover family in the Delhi High Court and arbitrating at the Singapore International Arbitration Centre (SIAC) to claw back part of Grover's stake under its shareholders' agreement with investors. A settlement announced on 30 September 2024 took him out of the shareholding.

The reports mention no founders' agreement among the three, only share transfers, and both co-founders later sued Grover over theirs. The share and title questions in the dispute, from what had vested to who could call himself a founder, can be answered in a signed agreement when a founder joins and copied into the company's Articles of Association.

Who founded BharatPe, and who owned what?

Bhavik Koladiya and Shashvat Nakrani incorporated Resilient Innovations on 19 March 2018 with 50 percent each, and Ashneer Grover joined as a third founder later that year; reports date his arrival from May to November 2018. Registrar of Companies filings reported by BW Businessworld show that after his July 2018 purchases Grover held 32 percent, Koladiya 42.5 percent and Nakrani 25.5 percent.

Mint reported that Koladiya was dropped from the founders' list in December 2018 "owing to large institutional investors' discomfort with having a person with a jail term in the US". Inc42's sources said Grover and Nakrani held his equity for him, and Outlook Startup reported that his stake, roughly 30 percent when it was split between the two, had been diluted to about 4 percent by March 2022. Koladiya later sued Grover over a further 1,611 shares (16,110 after a split), separate from the 745 he sold in July 2018. He says he transferred them under an agreement of 3 December 2018 for about ₹88 lakh that was never paid.

By March 2022 the other two had been diluted as well: Inc42 reported that Grover's stake had fallen from 22.7 percent to 9.5 percent over four funding rounds and put Nakrani at 7.5 percent (the Free Press Journal had 7.8 percent). None of these reports traces the steps from the July 2018 holdings to the later figures.

What went wrong between Ashneer Grover and BharatPe?

Ashneer Grover's relationship with BharatPe's board broke down between January and March 2022: an audio clip posted anonymously on 5 January was followed by his leave, a governance review by outside firms, his wife's dismissal and his resignation as managing director.

The clip allegedly recorded Grover abusing a Kotak Mahindra Bank employee over the Nykaa IPO allotment. On 6 January he tweeted: "It's a FAKE audio by some scamster trying to extort funds." On 19 January he took voluntary leave "till March-end". Alvarez & Marsal was appointed on 29 January to run the review and PwC on 1 February; A&M's findings of 4 February, Outlook Business reported, pointed to non-existent vendors and a ₹10.97 crore loss from fake invoices. The same day he told Moneycontrol the board should let him run the company or buy his stake for ₹4,000 crore. His emergency application to SIAC against the review was first heard on 20 February, and by 27 February the arbitrator had rejected "all the five grounds".

Around 22 February BharatPe terminated Madhuri Jain Grover, his wife and the company's Head of Controls, "in accordance with the terms of her employment agreement". The Tribune's sources cited fake invoices and spending on beauty treatments, electronics, family trips and personal staff.

Grover resigned as managing director and director on 1 March 2022 (The Quint dates it 28 February). He wrote that "today I am being forced to bid adieu to a company of which I am a founder." The board's statement of 2 March spoke of "creating fake vendors through which they siphoned money away". The Free Press Journal's sources said that because he had resigned without the approval of the board and majority investors, BharatPe could claw back up to 1.4 percent under the shareholders' agreement.

How did the BharatPe dispute end?

The BharatPe dispute ended in a settlement the company announced on 30 September 2024, under which Grover "will not be associated with BharatPe in any capacity nor be a part of the shareholding of the company". Certain of his shares were to go to the Resilient Growth Trust "for the benefit of the Company", and the remaining shares "will be managed by his family trust". Business Today reported that both sides would drop their pending cases.

The EOW arrested a vendor on 6 August 2024 and BharatPe's then procurement head on 19 September 2024. None of the proceedings decided the misappropriation allegations on their merits.

Inc42's sources put Grover's holding before the settlement at about 8.5 percent and said the family trust, in his children's names with an independent advisor, would hold about 4 percent. In April 2026 Business Standard reported that Nakrani would step back from day-to-day operations from 1 May 2026, keeping his board seat.

How common are co-founder disputes?

We have found no reliable count of co-founder disputes in India, only individual cases. The best-known figure comes from the United States and covers more than co-founders. Noam Wasserman, then a professor at Harvard Business School, studied founders for his book The Founder's Dilemmas. HubSpot co-founder Dharmesh Shah's summary of it, posted on OnStartups on 26 March 2012, says "65% of startups fail due to problems within the management team." The version usually quoted, that 65 percent fail because of co-founder conflict, is a later paraphrase. The Crimson reported that the book drew on "nearly 10,000 founders".

Among the Indian cases, the Housing.com board removed its chief executive, Rahul Yadav, on 1 July 2015, citing "his behavior towards investors, ecosystem and the media", after he had resigned in May and stayed on.

Should vesting and leaver terms sit in the founders' agreement or the Articles?

Vesting and leaver terms should sit in both: the founders' agreement records the deal, and the Articles of Association bind the company and every shareholder to it, including investors who arrive later. In V.B. Rangaraj (AIR 1992 SC 453), decided on 28 November 1991, the Supreme Court held that "A restriction which is not specified in the Articles is, therefore, not binding either on the company or on the shareholders."

The Delhi High Court applied the same reasoning to voting rights in World Phone, decided by Justice Muralidhar on 15 March 2013: an affirmative vote that was not in the Articles "cannot be said to bind the company". IndiaCorpLaw reads the Supreme Court's Vodafone judgment of 20 January 2012, (2012) 6 SCC 613, as a departure from Rangaraj. It quotes the court as saying that a shareholders' agreement's provisions "shall not go contrary to the articles", which it takes to mean that terms consistent with the Articles can bind even if they are not written into them. Whether Rangaraj has been overruled is unclear, and a term written into both documents avoids the question. Section 6 of the Companies Act 2013 sits above all of this: the Act overrides the memorandum, the articles and "any agreement executed by it".

Moving terms into the Articles takes a special resolution under Section 14, filed with the Registrar in Form MGT-14 within 30 days under Section 117, with the altered Articles filed within 15 days. Protections meant to survive later funding rounds can be entrenched under Section 5, which in a private company needs the agreement of all members and notice to the Registrar.

Our free Co-founder Prenup tool is built for agreeing these terms when a founder joins. The signed agreement should then be stamped under state law; in Maharashtra an ordinance of 14 October 2024 raised the duty under Article 5(h)(B) from ₹100 to ₹500.

How does reverse vesting work in India, and what does it cost in tax?

Reverse vesting in India is a contract term. The founder holds all the shares from issue, and if they leave early, the agreement and the Articles let the other founders, a nominee or a trust buy the unvested ones at a nominal price through a call option. When shares move below fair market value, the buyer is taxed on the shortfall once it exceeds ₹50,000, and the leaver's capital gain on unquoted shares is computed as if they had been sold at that value, the rule of the old Section 50CA.

Section 68(5) of the Companies Act 2013 allows a buy-back only from existing shareholders in proportion to their holdings, from the open market, or of shares issued under an employee stock option or sweat equity scheme. A company therefore cannot buy back one departing founder's shares alone unless they are ESOP or sweat-equity shares, which leaves a transfer to the other founders, a nominee or a trust.

In BharatPe's arbitration the company treated a 1.4 percent holding as unvested, and Entrackr reported that it asked for those restricted shares to be transferred to Nakrani for ₹33.02 lakh in total.

The buyer's charge is Section 92(2)(m) of the Income-tax Act 2025, the old Section 56(2)(x), with value worked out under Rule 57 of the Income-tax Rules 2026 (G.S.R. 198(E) of 20 March 2026, in force from 1 April 2026), which replaced Rule 11UA. In a company that has raised money at a high valuation, a call option at face value can leave both founders with tax on gains that exist only on paper. Our advice is to set leaver prices with that in mind, or to say in the agreement who bears the tax.

What else should a founders' agreement settle?

Beyond vesting, a founders' agreement should settle what the founders and the company owe one another, within the limits that Indian law sets.

Options for founders

Rule 12 of the Companies (Share Capital and Debentures) Rules 2014 excludes promoters, and directors holding more than 10 percent, from employee stock options. Startups recognised by DPIIT are exempt for up to ten years. Options can also go with the job: when BharatPe terminated Madhuri Jain Grover, The Tribune reported that her vested options were cancelled.

Shares held for someone else

In Koladiya's suit over 16,110 shares, the Delhi High Court on 30 April 2024 restrained Grover from creating third-party rights in them. Where a founder's shares must sit in someone else's name, we advise a signed document that names the real owner and sets the terms on which the shares come back.

Titles, board seats and jobs

BharatPe's board statement of 2 March 2022 listed three things Grover no longer was, "an employee, a founder, or a director", and each role needs its own document. On resigning, Grover said he would remain the "single largest individual shareholder", and he held his shares until the September 2024 settlement while BharatPe's arbitration sought to stop him using the founder title. Zomato, by contrast, gave Gaurav Gupta the co-founder title in 2019, four years after he joined. The agreement should say who is a founder and whether the title survives an exit.

Intellectual property

Under Section 17(c) of the Copyright Act an employer owns only work made "under a contract of service", so a founder who is not an employee has to assign their work to the company. Section 19 requires the assignment to be in writing and signed; one that is silent on duration lasts five years, and one silent on territory covers India. Under Section 45(4) of the Trade Marks Act 1999, until the assignee of a registered mark applies to register its title, the assignment is ineffective against a person who acquires a conflicting interest in the mark without knowing of the assignment.

Non-competes

Section 27 of the Indian Contract Act voids agreements in restraint of trade, except on a sale of goodwill within reasonable local limits. In Percept D'Mark, decided on 22 March 2006, the Supreme Court held that "a restrictive covenant extending beyond the term of the contract is void", while the restraint doctrine "does not apply during the continuance of the contract". A founders' agreement can hold a founder to exclusivity while they are in the business; a bare non-compete after exit is unlikely to be enforced.

Where do co-founder disputes go: arbitration or the NCLT?

Claims under a founders' or shareholders' agreement can go to arbitration if the agreement provides for it, while oppression petitions go to the National Company Law Tribunal (NCLT), and a founder can be in both at once, as Grover was. In Vidya Drolia, decided on 14 December 2020, the Supreme Court set out a fourfold test for which disputes can be arbitrated and said, at paragraph 46, that "insolvency or intracompany disputes have to be addressed by a centralized forum".

Oppression petitions are brought under Sections 241 and 242 of the Companies Act 2013. Under Section 244(1)(a) the petitioners must number at least 100 or one-tenth of the members, whichever is less, or hold one-tenth of the issued capital, though the NCLT can waive this. In BharatPe's case the SIAC tribunal dismissed Grover's jurisdiction challenge and stay plea in March 2024 and said his NCLT petition "has no bearing".

A founders' agreement should name the seat and the institutional rules and allow emergency relief.

Frequently asked questions

What is a founders' agreement in India?

A founders' agreement is a contract among co-founders recording the equity split, vesting, leaver terms, roles, intellectual property and dispute resolution. Under V.B. Rangaraj (Supreme Court, 1991) its transfer restrictions bind the company and shareholders only if they are also in the Articles of Association; IndiaCorpLaw reads the 2012 Vodafone judgment as a departure from that rule.

What happens to a co-founder's shares when they leave?

A founder who leaves remains a shareholder unless the Articles or a signed agreement require a transfer. Under Section 68(5) of the Companies Act 2013 the company cannot buy back one departing founder's shares alone unless they are ESOP or sweat-equity shares, so leaver terms name another founder, a nominee or a trust as the buyer.

How does founder vesting work in India?

Founders hold all their shares from issue, and the agreement and Articles let unvested shares be called back at a nominal price if a founder leaves early. When shares move below fair market value, the buyer is taxed on the shortfall once it exceeds ₹50,000, under Section 92(2)(m) of the Income-tax Act 2025, the old Section 56(2)(x). The seller's capital gain on unquoted shares is computed as if they had been sold at fair market value, under the old Section 50CA.

Can founders get ESOPs in India?

Not if they are promoters, or directors holding more than 10 percent: Rule 12 of the Companies (Share Capital and Debentures) Rules 2014 excludes them. Startups recognised by DPIIT are exempt for up to ten years, under an exemption inserted on 19 July 2016 at five years and extended on 16 August 2019.

Is a non-compete enforceable against a co-founder who leaves?

A non-compete that runs after a founder has left is usually unenforceable. Section 27 of the Indian Contract Act voids agreements in restraint of trade, and in Percept D'Mark (2006) the Supreme Court held that "a restrictive covenant extending beyond the term of the contract is void". Restraints during the relationship, and a promise within reasonable local limits on a sale of goodwill, fall outside that rule.

Can a co-founder dispute go to arbitration instead of the NCLT?

Contract claims under a founders' or shareholders' agreement can go to arbitration, as BharatPe's claim over shares it said were unvested went to SIAC. Oppression petitions go to the NCLT under Sections 241 and 242 of the Companies Act 2013, subject to Section 244's minimum numbers or holdings, and in Vidya Drolia (2020) the Supreme Court said that "intracompany disputes have to be addressed by a centralized forum".

Sources

V.B. Rangaraj (Supreme Court, 28 November 1991, AIR 1992 SC 453); Vodafone (Supreme Court, 20 January 2012, (2012) 6 SCC 613) and IndiaCorpLaw on it (6 June 2013); World Phone (Delhi High Court, 15 March 2013); Percept D'Mark (Supreme Court, 22 March 2006); Vidya Drolia (Supreme Court, 14 December 2020); court orders in the BharatPe litigation from 8 December 2022 to 11 November 2024, among them 2024 LiveLaw (Del) 519; the Delhi Police Economic Offences Wing press release of 20 September 2024; BharatPe's settlement statement of 30 September 2024; the Companies Act 2013, Companies (Share Capital and Debentures) Rules 2014, Income-tax Acts 1961 and 2025, Income-tax Rules 2026, Indian Contract Act, Copyright Act, Trade Marks Act and Maharashtra Stamp (Amendment) Ordinance 2024; Treelife's analysis of the dispute; reports in Inc42, Entrackr, Business Today, Business Standard, BW Businessworld (citing Mint), Outlook Business, Outlook Startup, Outlook Money, YourStory (citing Moneycontrol), The Tribune, the Free Press Journal, The Quint, The News Minute, Kashmir Reader, LiveLaw, Bar & Bench, Business Insider and TechCrunch between July 2015 and April 2026; Dharmesh Shah's OnStartups post of 26 March 2012; and The Crimson, 9 April 2012.