The founders of Lybrate Inc. have moved a Delaware court to start arbitration proceedings against healthcare startup Pristyn Care, which has failed to pay them in full for acquiring their company last year. The founders also plan to seek over $13 million in damages in arbitration, a court filing showed.
Tiger Global-backed Pristyn Care, which is operated by GHV Advanced Care Pvt. Ltd and runs a network of hospitals and clinics through partners, had acquired Delaware-incorporated doctor consultation platform Lybrate to enter the primary care segment. The total deal size was said to be $20-30 million, including payments to Lybrate’s investors such as Nexus Venture Partners, Tiger Global Management and Ratan Tata’s RNT Associates. Both founders joined Pristyn Care following the acquisition.
In their court petition, Lybrate founders Saurabh Arora and Rahul Narang said they received only $1.5 million out of the $8 million payment in the first tranche, while the investors were paid in full.
“GHV received 85% of plaintiffs’ Lybrate stock but only provided $1.5 million in total fixed consideration, with the remaining $6.5 million of non-contingent consideration to be split over the following two years,” the filing said.
The founders said they were scheduled to receive a combined $3 million in June under their original agreement, but this payment was not made. The balance payment of $3.5 million is due in 2024, according to the original agreement. In addition, around $4 million was promised based on milestone achievements during the third tranche.
Pristyn Care and Lybrate founders Arora and Narang did not respond to requests for comments on Monday.
Pristyn Care suspended Lybrate’s founders in July after they served a default notice, Mint reported on 20 July. While the founders have asked for a Delaware-based arbitrator, Pristyn Care has sought to appoint a London-based arbitrator, the filings showed.
“Plaintiffs intend to hold GHV accountable for the aggregate damages amount, which by plaintiffs’ estimation is in excess of $13 million,” the filing said.
Pristyn Care has denied it owes payments to Lybrate founders. The Mint report quoted a company spokesperson on 20 July, “Pristyn Care has and shall continue to act in accordance with the contractual terms and conditions. Pristyn Care has not defaulted on any of its contractual obligations.”
Later in a court response filed on 21 November, Pristyn Care said it did not complete the “Tranche II transfer due to a pending investigation into allegations of improper conduct by plaintiffs.”
Pristyn Care turned unicorn in April 2021, in a funding round led by Tiger Global Management. Its other investors include Peak XV Partners (formerly Sequoia Capital India), Hummingbird Ventures and Epiq Capital. At that time, the company said it had raised a total of around $150 million from external investors.
Pristyn Care reported a revenue of ₹96 crore and loss of around ₹64 crore in FY21. It has not yet filed its FY22 financial statements.
On 5 November,Mint reported that Pristyn Care’s auditors had flagged “material weakness” in the internal controls in the company. The findings included an instance of a Pristyn employee providing the auditor with “certain documentary evidence in relation to agreements with doctors, which were not genuine.”