Cyber café chain leaves franchisees high and dry

Akhtar Pasha / Bangalore

Hundreds of Sutra i café franchisees and more than 400 trainees wanting to make a career in the call centre industry have been duped to the tune of Rs 2 crore by a Bangalore-based IT company, Sutra Info Solutions. The company had placed advertisements in dailies promising what had all the trimmings of a ‘get-rich-quick’ scheme. It proved to be quite tempting for 150 businessmen who took Sutra up on its offer. Today, the franchisees are sitting on a pile of bounced cheques.

Based on the complaints of Sutra’s victims, the Bangalore police have arrested Sutra’s finance director Raju Krishnamurthy, who himself seems to have lost Rs 50 lakh. The mastermind, CEO Ajay Saha, is still at large along with his colleagues Rakesh and Shiv Kumar who were directors at Sutra. Saha—believed to be based out of Kolkata—has been accused in a lawsuit of defrauding franchisees and has an arrest order issued in his name. The police have seized the company’s office premises, including all office equipment and documents.

A well-planned con job
Sutra was offering Internet browsing at rock bottom prices of Rs 15 for 15 hours per day per log-in. Simply put this meant that you could go to one of the i Cafés and browse to your heart’s content for Rs 15 as long as you didn’t take a break from surfing. The company also offered a ten-day card permitting seven log- ins over that period with unlimited usage subject to the same restrictions and a two-month card permitting 15 log-ins. The economics just didn’t make sense as competing cyber cafés run by Sify were charging Rs 25-30 per hour.

Deputy commissioner of Police Abdul Salim believes that it was a well-planned deliberate case of cheating. Consider the following facts:

In November 2002, Sutra duped its own employees. The company took a deposit of Rs 3,000 from each of its 12 employees and put them in administrative jobs in the same company. By the end of 2002 the company recruited 460 trainees for the purpose of setting up a call centre for overseas projects. All these trainees were asked to pay a deposit of Rs 6,000 each on the pretext of conducting special call centre training for technical support and later employing them. Police records reveal that none of them were given any training and the total amount collected from trainees was Rs 27.6 lakh.

In January 2003, the company planned a second venture, this time taking advantage of the beleaguered Internet café segment. It launched an aggressive marketing campaign and signed up 107 franchisees in Bangalore, and another 40-50 franchisees in smaller towns like Mysore, Udipi, Mangalore, Cochin and Ahmedabad. Sutra took a non-refundable deposit of Rs 50,000 from each franchisee, assuring them a return of Rs 50,000- Rs 60,000 plus per month on a regular basis. In addition to this, the company asked its franchisees to buy Internet cards worth at least Rs 10,000. Additionally, Bulls Eye Media, the ad agency that undertook Sutra’s advertisement campaign in various dailies in Bangalore, Mangalore and Cochin is stuck with bills amounting to Rs 34 lakh that have not been cleared. Bulls Eye Media general manager Keshav Murthy says, “Saha deferred the payment saying he will clear the cheque soon after the completion of the company’s registration. Later Sutra issued two cheques—one for Rs 24 lakh and another for Rs 10 lakh—but both bounced.”

All of Sutra’s office equipment was rented. Sutra failed to pay the advance of Rs 6.4 lakh for its office premises located on the upmarket Airport road. Sutra also owes rentals to Sumo Technologies for 80 desktop PCs, one IBM server, five notebook PCs, four Cisco switches, printers and accessories—these rentals work out to Rs 4.15 lakh. Sumo Technologies’ owner, Sreedhar H S says, “Besides the rentals, equipment worth Rs 15 lakh supplied by us to Sutra is stuck in police custody.” Sreedhar needs to get a court order to get Sumo’s equipment released.

Furniture was also hired. Sutra’s phones are disconnected and Saha’s mobile number is blocked. Even the company’s website www.sutrasolutions.com has ceased to exist. Saha’s account with UTI and Centurion bank has a balance of zero.

Modus operandi
The company’s modus operandi was to lure existing Internet café owners who became Sutra i Café franchisees by paying a non-refundable deposit of Rs 50,000 as a franchisee fee. Sutra promised a guaranteed return of minimum Rs 45,000 per month if the franchisee had 10 computers. In addition to this, it promised to clear Internet charges and phone bills worth Rs 10,000 or above. This offer proved to be irresistible to Internet café owners. To win their confidence, the company paid up Rs 45,000 for the first month to the initial set of 40 franchisees.

Let’s do the math. Sutra guaranteed that it would pay Rs 10 per system per hour if the Internet café was open for at least 15 hours a day. That’s Rs 1,500 per day per franchisee right there. Multiply this by 30 days you get Rs 45,000 per month per franchisee. Naveed Ahmed, who runs an Internet café, says, “Sutra’s business proposal gave Internet café owners the opportunity to earn additional money. They promised us at least Rs 10,000 depending upon the number of PCs we had.”

What was Sutra getting from this deal? Ahmed says that Sutra informed them they were developing cutting-edge biometric-based security solutions (similar to fingerprint scanners) for logging into the PC for browsing. All Sutra i café franchisees would act as reference sites for Sutra’s global customers for its biometric solutions. “When we asked them to show us the product, the company said it is in the development stage and it will be ready in three to four months. Meanwhile the company gave the first cheque of Rs 50,000 in April 2003 as promised and that gave us the confidence to believe in them. When the second cheque did not come, our suspicious grew and we came to know that we have been duped,” says Ahmed.

In the end, it was a sad tale but one that has been told before. Sutra offered a proposition that was too good to be true. The reason it worked was because cybercafés are seeing a dip in business. The average cybercafé used to make Rs 20,000-25,000 in profits every month in 2002 (varying as per the locality). This year, that has dropped to Rs 15,000 per month. In such a situation, it was only natural that Sutra found businessmen ready to take up its offer.