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Rediff News  All News  » Business » A cyber cafe goes bust in Bangalore!

A cyber cafe goes bust in Bangalore!

May 10, 2003 16:26 IST

A small Bangalore-based information technology company, Sutra Info Solutions Limited, ventured into the world of cyber cafes early this year to offer a range of Internet services, including browsing at the unbelievable hourly rate of Re 1!

Four months down the line, Sutra i Cafe, which launched a network of cyber cafes in Karnataka through its own branch offices and the franchise route, has done the vanishing trick. Its suave CEO Ajay Shah is absconding while finance director Raju Krishnamoorthy is cooling his heels in a city police station.

Deputy Commissioner of Police Abdul Salim told on Friday that a search has been launched for Shah while Krishnamoorthy was sent to police custody for five days from Thursday under section 420 of the Indian Penal Code, on charges of committing fraud and duping the public.

Salim said the police has sealed Sutra's main office in a posh locality of Bangalore and posted constables to guard its property, including computers, servers, and office equipment, after registering a case of fraud against the proprietors. A search is also on for other directors and senior employees of the company.

Shah is believed to have vacated his residence a month ago, when he went to Cochin, ostensibly to collect payments. He never returned. The finance director is being interrogated to ascertain Shah's whereabouts as well as those of other members of his management team.

The police got wind of Sutra's alleged shenanigans when some of its franchisees and several students who had enrolled with the company for training after coughing up thousands of rupees filed cheating cases against the management on Wednesday.

The police swung into action and raided the company's premises, located on the eighth floor of Oxford Towers, a hi-tech office building on the busy city airport road. "A quick search led to incriminating documents and initial verifications have indicated that all was not well with its operations," the DCP disclosed.

Incidentally, the company's Web site,, has also ceased to function.

About 450 promising students and 200 franchisees from Bangalore and other towns in the state have allegedly been left in the lurch, with their training fees and security deposits gone. "Initial estimates reveal that the company swindled a cumulative amount of Rs 1.20 crore [approximately US$ 253,700] from these hapless students who were promised a job after three months of training, and franchisees who were assured of logistical support for setting up their Internet outlets across the state," DCP Salim said.

For manning its main operations and the Internet kiosks across the state, the company hired about 400 candidates who had to pay a deposit of Rs 6,000 for customer support training, and Rs 25,000 for technology support.

But a number of employees have since been sacked, one of the victims of the scandal said, adding, "Some of the instructors have stopped reporting to office since May 1 as they have not been paid their salaries for over two months."

What's more, the company has failed to pay rent and maintenance charges amounting to Rs 500,000 for its premises for April, according to a complaint filed by the building owners.

R Raghu, an administrative employee of Sutra, told the police that even phone bills were not paid, but the staff was unaware of the serious financial crisis being faced by the company.

When Sutra's original international call centre project for overseas firms failed to take off, the promoters hit upon the idea of launching an extensive network of cyber cafes, christened Sutra i Cafe, in February 2003 with an investment of Rs 7 crore (US$ 1.48 million). The exact source of funding was not known, though the promoters claimed it to be from their personal funds and internal accruals of the parent IT firm.

Having lured a number of franchisees with flashy full-page advertisements in local dailies and a lavish media launch, the company opened 42 Sutra i Cafes in and around Bangalore, six in Mangalore, two at Udupi, and four at Cochin in Kerala in the first three months.

But teething troubles and last-mile problems plagued their operations and the centres began discontinuing their customer services one after another.

Sutra offered its customers/subscribers a range of pre-paid cards of varying denominations and durations. For instance, a one-day card at Rs 15 used to be given for one log-in without a validity period. Another Sutra package was for a ten-day pre-paid card with seven log-in chances between 0900 and 0000 IST over the same period for Rs 99.

The company also introduced cards with validity periods of one to three months with multiple options and log-ins. The promoters also planned to expand Sutra's operations in Ahmedabad, Mumbai, Goa, Hyderabad and Pune in the second phase.

Fakir Chand in Bangalore