In this blog post, Sanjna Vijh, a student of Bharati vidyapeeth University, Pune, who is currently also pursuing a Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, writes about The Viral Fever legal battle of founders and how a co-founders’ agreement could have helped in avoiding the co-founders’ dispute.
A lot of partnerships fail due to the conflicts between the partners or the consequences could take an ugly turn when the partnership is coming to an end due to the clash of ideas between the partners or money related disagreements between them.
TVF Case
A popular online entertainment channel, The Viral Fever (TVF), a sole proprietorship of Mr. Arunabh Kumar has been dragged into a legal battle of founders. Founder Arunabh has been sued by Prashant Raj, a friend and fellow alumnus from IIT Kharagpur. As per the news articles, Prashant Raj is making an exit and demanding compensation for his share of work with TVF[1].
The lawsuit for specific performance of an oral agreement, allegedly executed between the parties in 2012, was filed in the High Court of Bombay. The plaintiff claimed that he was offered a position of Partner & Director – Operations, and Strategy & Business Development by Arunabh. He further claims that in this capacity, as per the agreement, he was allotted 4% equity in the company, producer’s fee of 7.5% on projects and Rs. 30,00,000/- p.a. salary from October, 2012.
Justice Roshan Dalvi has ruled that the parties settle the dispute by compensating the plaintiff for his services rendered as per the rule of Quantum meruit i.e. as much as he deserves, or what one has earned but he won’t be offered any equity. Dissatisfied by the ruling, Prashant Raj has filed an appeal[2].
How a co-founders’ agreement could have helped
In the current state of affairs, a co-founders’ agreement between Mr. Arunabh and Mr. Prashant Raj would have settled the dispute rather amicably. A co-founders’ agreement governs the professional relationship of founders which states various important clauses such as monetary share, decision making process, dispute resolution etc.
In the TVF dispute, the existence of an oral agreement led to a lot of contemplation and confusion as to the terms to settle the dispute. The quantum of consideration could not be rightly ascertained for the services rendered as the duties of Mr. Prashant Raj were not specified. The dispute was also attempted to be resolved by mediation initially which ended up in a lawsuit ultimately. If the founders had entered into a co-founders’ agreement, it would have been an easier settlement saving Mr. Arunabhkumar the legal drama and would not have landed TVF in a soup. However, this might make for a new concept of show for TVF.
Footnotes:
[1]http://economictimes.indiatimes.com/small-biz/startups/the-viral-fevers-cofounders-battle-it-out-in-court-against-each-other/articleshow/49546234.cms
[2]https://indiankanoon.org/doc/72772857/
