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NEW DELHI : Fashion B2B e-commerce startup Zilingo Pte paid 68 crore to firms owned by or related to Sandeep Kapoor, a former general counsel for India and South East Asia at Sequoia Capital India, the Silicon Valley venture capital firm said in a court filing on Saturday. Sequoia said a forensic audit specialist it hired could not find any justification for this payment, prompting the VC firm to caution its portfolio companies against doing business with companies controlled by Kapoor.

Sequoia Capital India was made aware of a “disproportionately large payment" in mid-March, which made the board of Zilingo entrust forensic investigator Kroll to conduct a probe with regard to Zilingo, the VC firm said in an affidavit submitted to a city court in Bengaluru on Saturday. The fact-finding exercise revealed that the services rendered did not justify the payment given to plaintiff No. 2 (Algo Legal), related firms, and another closely connected entity, Sequoia said in its 19-page affidavit.

Of the 68 crore, 45 crore was paid to Algo Legal, while 18 crore was paid as fees to a firm “closely connected" with Kapoor for an alleged software system that was never delivered, the affidavit said.

“The fact-finding exercise concluded that several of these payments were not in consonance with the engagement terms/contracts between the plaintiff No. 2 firm and the above-mentioned portfolio company," said Sequoia, referring to Algo Legal and Zilingo respectively.

A counsel for Kapoor and Algo Legal told the court that Sequoia’s allegations with regards to Zilingo were without merit. Kapoor, who worked with Sequoia between June 2010 and March 2019, founded Algo Legal a few months after leaving the VC firm.

Sequoia Capital India was dragged into a legal fight by Kapoor, who has alleged that Sequoia’s letter to its portfolio companies earlier this month cautioning them against working with his firms, including Algo Legal, was baseless. News reporting by media, including HT Media which publishes Mint, and a couple of other media firms, hurt his reputation, Kapoor contended.

While cautioning its portfolio companies, Sequoia termed Algo Legal and four entities as related, one of which is incorporated in Singapore. These are Themis, Quant Legal Tech India Pvt. Ltd, One Delta Technology Solutions Pvt. Ltd, and One Delta Synergies Singapore Pte.

Sequoia snapped its ties with Algo Legal in January after the founders of a Bengaluru-based unicorn told its board members, including a Sequoia representative, that Kapoor had solicited business in an aggressive manner, Mint reported in its edition dated 6 June. “I write in relation to the upcoming expiry/renewal cycles of engagements between SCI entities and Algo/Quant Legal, to let you know that the SCI entities wish to terminate all engagements," an executive of Sequoia wrote, in an email dated 31 January, to Dhruv Nagarkatti, the then chief operating officer at Algo Legal.

Nagarkatti resigned from Algo Legal on 3 June after news of Sequoia snapping ties surfaced in the media. In the last two months, at least 24 lawyers, including six partners, have left Algo Legal, as many were concerned about reputational damage, Mint reported in its edition dated 7 June.

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