The arrest and subsequent remand to police custody of Yogendra Vasupal, founder and CEO of homestay aggregator Stayzilla, has made the entire start-up community to come together to protest the police action.

In a series of developments, starting with the arrest of Vasupal on Tuesday evening, to a vendor sending a series of emails claiming that Stayzilla had defaulted on payments from April last year, industry icons such as K Ganesh, serial entrepreneur and co-founder of Growthstory, and Flipkart’s co-founder Sachin Bansal came out in support of Vasupal. Ganesh said such action sends a wrong signal to the entire start-up ecosystem. “There are sensible ways to solve such cases. Stayzilla founders are good professionals and have been upfront in giving three months’ notice before closing down. Do not harass them. It is bizarre to take the founder into custody,” he said.

Bansal also tweeted that the police action was wrong. “Let the law take its course, but intimidation of #stayzilla founders crosses a line. It’s unhealthy for entrepreneurship in India,” he said.

But Aditya CS, who runs Jigsaw Solutions, which had filed the police complaint against Stayzilla, told BusinessLine that the first time Stayzilla defaulted was in April 2016. “We expected them to pay us back after they received funding of $13 million series C funding in May 2016. But even after several months after that, we still had not been paid.”

He claimed that the founders threatened him after he repeatedly kept asking them to settle the dues which was as high as ₹1.7 crore.

“They promised to pay but never did. Instead they threatened me and closed down the company without informing those they owed money,” he said. Sources in the industry said that Stayzilla also owes money to travel portals such as makemytrip.com. But a spokesperson for the portal said they will not comment regarding the issue.

Vasupal’s post In a long post that he tweeted, Vasupal said he had told the policemen who visited his house that there was a civil dispute between the company and the vendor which can be settled in court.

“I also pointed out that various parties owed us as much as ₹7 crore and we were not going to file criminal cases against them,” he said. He further said that his lawyer informed the police that the dispute was with regard to “severe deficiency of services” on the part of the vendor and if they believe that they had been wronged, they were free to take it up legally. In spite of such clarifications, Vasupal was taken into custody on March 14 evening and produced before the magistrate at 10 pm the same day. He is currently lodged in Puzhal Central Prison.

Indian Angel Network (IAN), an early stage investor in Stayzilla, also came out in support of the founder. “The Stayzilla episode, where the founder has been summarily thrown into jail for what appears to be at best a civil matter has shocked the entire start-up community,” an IAN email said.

The TiE Chennai chapter too protested the police action and said a civil dispute had been made into a criminal case.

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