In a Singapore court, India's second-largest fintech is battling two established investors in the five-year-old company, Affle Global and early-stage investment firm Ventureast, over a seemingly straightforward acquisition by PhonePe of homegrown content discovery platform Indus OS for about $ 60 million.

According to the people familiar with the matter, PhonePe was in the final stages of closing its acquisition of Indus OS before mid-June, with the term sheet signed and ready.

However, Indus OS' minority shareholder, Affle Global, a global mobile advertising firm, filed an arbitration case against IndusOS in Singapore in May, seeking an injunction against the contract. In this situation, Affle Global uses its right of first refusal (ROFR) to challenge the selling of the Indus OS founder's stake to PhonePe.

PhonePe then retaliated by taking Affle and another of Indus OS' investors, Ventureast, to court in Singapore.

“We assume they (Affle and Ventureast) conspired to behave in bad faith and breach the legal provisions of the term sheet to which they both signed. As a result, we have filed a lawsuit against these parties to defend our legal rights, and we are sure that the court will rule in our favour,” the company said.

"Affle is raising issues on valuation of Indus OS and right of first refusal (ROFR) on stakes owned by the company's founders," a source close to the situation said.

Meanwhile, an Affle Global spokesperson said that the company has not signed any alleged binding-term sheet with PhonePe or any Walmart-owned company for the sale of any investment as of yet.

PhonePe's commitment to "completing the transaction as soon as there is a verdict on the court proceedings," according to a spokesperson, "will not change our intentions to acquire Indus OS in the least”.

According to reports, PhonePe has acquired a 30 percent stake in Indus OS and two seats on the board of directors, with Omidyar, JSW Ventures, Micromax, and other angel investors selling their shares to PhonePe, with the payments giant looking to acquire a 90-92 percent stake in the startup.

“Yes, we have acquired about 30 percent of the company and are the single largest shareholder of Indus OS already,” a Phone Pe representative said.

“We expect to finish the remaining paperwork and obtain majority control of the company within the next few days, subject to the results of the court proceedings. “All three founders are staying on and will continue to direct the company's operations even after the transaction is completed”, said the representative.

Meanwhile, Indus OS, the firm at the centre of the legal battle, has confirmed that it is ready to complete its acquisition with PhonePe and that "all the founders and board members have signed the term sheet to sell a substantial majority of the company to PhonePe”.

Rakesh Deshmukh, Akash Dongre, and Sudhir Bangarambandi, three IIT alumni, formed Indus OS in 2015. Indus App Bazaar, the company's local Android app store, provides applications and content in more than a dozen Indian languages. According to the business, it hosts over 400,000 apps and serves over 100 million users across India.

Through in-app integrations, PhonePe will be able to put a broader range of applications onto its network as a result of the acquisition. This is PhonePe's second acquisition, following the purchase of Zopper, a point-of-sale company, in 2018.

“We are very excited to work with them on the future vision and plan for Indus OS. “I believe this is the best way forward for Indus OS, and we are completely committed to closing the deal as soon as possible”, said an IndusOS spokesperson.