Edtech Upstart Saarthi Strikes Back: Alleges Cheating and Trust Breach in Classplus Acquisition Saga

• ByStartupStory     |    August 10, 2023

Edtech startup Saarthi, founded by Chirag Kapil, has taken legal action against Classplus, along with its founders Mukul Rustagi and Bhaswat Agarwal and CFO Sankalp Aggarwal. The lawsuit accuses Classplus of cheating, breach of trust, extortion, criminal intimidation, defamation, theft of property, and more. Saarthi alleges that the charges stem from a complex acquisition process that started in late 2021.

Classplus, a SaaS startup, provides tools for educators to create customized applications, while Saarthi offers a live educational tournament platform in vernacular languages. The two companies engaged in acquisition discussions in October when Kapil assumed a key role in Classplus. However, he was unexpectedly terminated a few weeks later, leading to a sequence of events that culminated in legal proceedings.

“Furthermore, investors associated with Saarthi have not received their stipulated agreements or the corresponding equity they were entitled to,” the statement read.

According to Saarthi’s statement, investors associated with the startup did not receive the stipulated agreements or entitled equity. By February 2022, even before official agreements were finalized, Classplus allegedly had access to Saarthi’s proprietary information, intellectual property, and workforce.

The lawsuit indicates that the financial terms of the acquisition included a $30 million incentive for Saarthi’s founders, equity worth $350,000 for existing investors, and other investors like Axilor, Vinod Sood, Paras Batra, Ayush Banka, Ritesh Malik, Faad Network, Rahul Dalmia, and Sricharan Iyengar.

“Classplus’ failure to pay us (Saarthi’s investors), despite numerous attempts to resolve the issue, is more than just negligence—it’s a glaring sign of bad faith. We investors were left abandoned and deceived, and we demand immediate action. This isn’t just business; it’s a matter of principle, and we won’t rest until it’s rectified,” Leaf’s Banka said.

Saarthi’s investors express frustration with Classplus’s failure to fulfill payment obligations, considering it an act of bad faith. Classplus, valued at over $600 million in 2022, is backed by venture capital firms including Tiger Global, Peak XV’s Surge, Blume Ventures, Alpha Wave, and GSV Ventures. Both Saarthi and Classplus have presented their arguments in the Delhi High Court, with a hearing scheduled for September.

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