Drivezy sues Yamaha for launching a competing business and terminating the transaction

• ByStartupStory     |    October 20, 2022

Drivezy has claimed in court that Yamaha, a Japanese automaker, used the Bengaluru company’s exclusive information to launch a rival operation while claiming it would buy the bike and car rental startup out. The business further claimed in a petition brought before a Bengaluru Additional City Civil and Sessions Judge that Yamaha, which is also a Drivezy investor, forced the business to divulge sensitive information about its operations.

One of the Yamaha divisions Drivezy is suing, Moto Business Service India Private Limited, issued the following statement: “MBSI claims that these charges are absolutely without merit; Drivezy brought the legal action against MBSI, and we wish to make no further remarks on this.”

By December 2021, Yamaha was putting out a prepackaged insolvency resolution plan via which it would purchase Drivezy’s assets in the US and India via an assignment for the benefit of creditors (ABC) filing in Delaware and through bankruptcy at the National Company Law Tribunal.

Over the course of the months, Yamaha received a tonne of sensitive information from Drivezy. The business intended that the information would be applied to evaluate a potential $35 million acquisition made through insolvency.

Yamaha, however, stated that it would initially lend some money to Drivezy as part of this insolvency procedure by purchasing its assets — as the business was already going to be bought — and carry out the insolvency process at a later point. The lawsuit claims that at that point, Yamaha fully assumed ownership of the assets and began paying Drivezy’s employees’ salaries, despite the company’s expectation that it would be absorbed into Yamaha’s global operations.

A Yamaha executive allegedly stated that the business’s management was having concerns about the insolvency takeover process after settling a few bills with this financial infusion, and then demanded that the tangible assets, like cars, be given over to the company.

The lawsuit stated that the Indian Company, the target of the acquisition, “was to remain with the physical assets, not its assets,” and that Yamaha’s GST payment for the sale of the assets was only required to be paid from a later tranche of the loan infusion.

“To the shock of the Plaintiff the Defendants surreptitiously behind the back of the Plaintiffs were engaging in activities competitive to the Plaintiff, directly and indirectly, using the Confidential Information of the Plaintiffs to set up a same/similar business as that of the Plaintiff while cutting out the Plaintiffs completely,” the lawsuit states after Drivezy returned some of the asset-backed funds to Yamaha and used the remaining funds to pay salaries, server costs, and auditors.

Yamaha made investments in Rapido, Zypp, and Royal Brothers, competitors of Drivezy. The corporation was allegedly giving them access to Drivezy’s confidential information by doing this, according to the lawsuit. The lawsuit also claimed that Yamaha was using a Dubai-based organisation to create its own digital platform that was comparable to Drivezy.

The lawsuit claimed that the startup attempted to contact the automaker for clarity as Yamaha submitted an application for a licence in Karnataka to launch activities comparable to Drivezy’s. The lawsuit was approved by Drivezy’s board after they didn’t hear back. Yamaha allegedly reneged on a $41,000 payment through the Startup Scale 360 accelerator and informed Drivezy that its declared intent to buy the company had expired as a “counterblast” to the claim.

Yamaha’s original $2 million, according to Drivezy, was part of a “planned criminal conspiracy” to get access to the private information the company would require to launch a Drivezy-like company. The company has sought the court an injunction to ban Yamaha from starting a firm that is similar to its own and to cease using its proprietary knowledge for commercial purposes.

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