Inside The Legal War Brewing Between Medikabazaar's Ousted CEO & Investors

While the Indian startup ecosystem was grappling with the fallout from the corporate governance lapses at the likes of GoMechanic, , and BharatPe, another storm was quietly brewing at Medikabazaar, one of India’s largest B2B medical supplies startups.

There were no telltale signs at first. No public battles. No dramatic exits. But behind the scenes, tensions were brewing.

What started with an anonymous whistleblower complaint alleging financial irregularities soon escalated into a full-blown boardroom battle, resulting in the firing of Medikabazaar founder and CEO Vivek Tiwari.

In August last year, the former CEO also moved to the Delhi High Court against the startup and some of its investors. In a petition filed with the HC, the founder has accused Medikabazaar’s investors – HealthQuad, Creaegis, and Ackermans & van Haaren – of orchestrating a plan to unlawfully strip him of his position and rights as a promoter.

According to the court filings accessed by Inc42, Tiwari filed the petition under Section 9 of the Arbitration and Conciliation Act, 1996. The former CEO has sought urgent interim protection against what he has termed an “orchestrated attempt by investors to unlawfully oust him” from his role and promoter status.

While Medikabazaar declined to comment on Inc42’s queries regarding the allegations made by the former CEO, emails sent to investors did not receive a response till the time of publishing this story.

The next hearing in the matter is scheduled for April 30.

Amid all these, it was reported last week that , citing “malicious and fraudulent activities”.

But to understand the ongoing legal battle, let’s first go through Tiwari’s allegations and the timeline of events at the startup.

The Back Story

Tiwari cofounded Medikabazaar in 2014 with Ketan Malkan. Prior to that, he was the COO of AMRA Renal Care. He also worked with the Tata Group and Nestle.

On December 13, 2023, Medikabazaar’s statutory auditors received an anonymous whistleblower complaint alleging financial irregularities at the startup, involving Tiwari, then recently appointed CFO Raman Chawla, and 15 other employees.

Following this, as per the petition, Medikabazaar’s board appointed Rashmikant & Partners (R&P) as an independent third-party expert in April 2024 to investigate the complaint.

In his petition, the former CEO has alleged that Medikabazaar’s board convened a last-minute meeting on August 23, 2024 and barred him from attending it. During the meeting, the board allegedly passed a resolution to terminate Tiwari as the CEO. Besides, it declared an “Event of Default”, stripping Tiwari of his rights as a promoter under the shareholders’ agreement (SHA) signed between the cofounder, Medikabazaar and its shareholders.

Tiwari has alleged that the board’s decisions were in violation of the SHA as well as the employment agreement, as they stipulate that any termination for a “cause”, defined as fraud or wilful misconduct, must be based on a report from a third-party expert. The third-party should complete its investigation within 90 days of starting the probe, as per the agreements. However, Tiwari alleged that R&P didn’t submit the final report even eight months after the whistleblower complaint was received.

The former CEO has alleged that on May 12 last year, he was “coerced” into providing a “concession letter”, in which he agreed to waive his promoter rights under the SHA and transfer up to 86.4% of his equity to board, provided he was released from liabilities arising out of the investigation.

Tiwari revoked this letter on August 22, 2024, citing coercion and a lack of transparency in the ongoing investigation, after the startup decided to send him on a mandatory 8-month leave.

Notably, he held a 39.3% stake in Medikabazaar at the end of FY23.

Tiwari has alleged that the decision to terminate him as the CEO was taken a day after he revoked the concession letter.

Following his termination, the startup’s board circulated a resolution to appoint Dinesh Lodha as the CEO of Medikabazaar, bypassing Tiwari’s promoter rights, the cofounder has alleged. Lodha was earlier the country head of Samsung India and group CEO of TI Medical.

Tiwari has alleged that the investors pushed him out and took control of the startup’s board and capital structure without following the due process.

“I sent a 30-page representation demanding explanations. Nobody responded. Instead, they held meetings with just 47% shareholder representation when 51% is required for an ordinary resolution,” Tiwari told Inc42.

Tiwari Rejects Allegations

In the petition, the startup’s cofounder has sought the following interim reliefs:

• Stay on the termination letter dated August 23, 2024
• Stay on the board and investors from acting on any decisions taken during the August 23 board meeting
• Stay on any alterations to the startup’s board structure or promoter rights until the end of the arbitration

Meanwhile, rejecting the allegations of financial irregularities, Tiwari alleged that it was the startup’s board that stopped him from hiring a professional CFO.

Tiwari told Inc42 that he highlighted the need to hire a professional CFO as early as 2020 due to the growing scale of the startup, multi-vertical supply chains, and other complexities in the business. This, he said, called for “sophisticated financial oversight”.

However, he alleged that the hiring process was delayed, despite using the services of multiple hiring agencies, due to differing opinions and control exercised by the board members and some investors of the startup.

It is pertinent to note that Medikabazaar cofounder Malkan acted as the CFO of the startup from 2017 to 2023. However, Tiwari said that Malkan’s limitations in the role of the CFO became clear as the startup started growing.

The former CEO said that a new CFO, Raman Chawla, was hired only in 2023, however, the appointment was too late. “If I had been allowed to hire a CFO in 2020, today’s outcome would be very different.”

Tiwari added that even after Chawla’s appointment, no red flags were raised about the startup’s books either by the board or the auditors until the whistleblower complaint surfaced in late 2023. “PwC did not flag issues in their audits till December 2023. The moment the letter appeared, suddenly everything changed.”

Further, Tiwari said that Chawla, despite being named in the whistleblower letter, allegedly led the internal investigation himself. “It is hard to digest that someone named in the complaint was allowed to oversee the investigation,” he said, calling the process “deeply flawed”.

Tiwari further said that neither the board nor the auditors, including PwC, had raised concerns prior to the whistleblower complaint. “PwC did not flag issues in their audits till December 2023. The moment the letter appeared, suddenly everything changed.”

Board Paints Other Picture

Despite Tiwari’s allegations, he is facing serious charges. The board of Medikabazaar has accused him of financial mismanagement, governance failures, and fraudulent conduct.

Even before R&P, the independent investigator for the whistleblower complaint, submitted its final report, the startup’s board reportedly claimed it had found enough material grounds to act against Tiwari. These included auditor PwC’s observation that Medikabazaar’s gross merchandise value was overstated by at least 60%.

The auditor also said that the same medical products were repeatedly sold through multiple entities, artificially inflating the startup’s business metrics.

Meanwhile, Medikabazaar’s Series C investors — who valued the startup at $650 Mn during its $65 Mn funding round in 2022 — are now locked in a dispute with the startup. The investors have filed an indemnity claim of INR 278.7 Cr (over $32 Mn), alleging financial misreporting.

Citing the rationale for removing Tiwari from its board, Medikabazaar said that his decisions and oversight compromised the integrity of financial reporting and potentially exposed the company to regulatory liabilities.

All said and done, once again, a high-growth Indian startup finds itself mired in a governance crisis — a reminder of the fragile balance between founder control and investor oversight.

As the legal proceedings unfold, several questions remain unanswered. If systemic financial irregularities did occur, how could the CEO remain unaware or fail to act? As a CEO, the buck stops with Tiwari, and he can’t get away by citing the complexities of the business and blaming the board and investors.

At the same time, the role of the board and investors also invites scrutiny. Why were financial red flags not addressed earlier? Did the board delay key appointments that could have strengthened oversight?

Nevertheless, the Medikabazaar saga has once again emphasised the need for clear and collaborative governance frameworks for both founders and investors to actively uphold oversight, and not just ownership. In the absence of these, for the foreseeable future.

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