Even as Stayzilla co-founder & CEO Yogendra Vasupal continues to be in custody, efforts are on for a settlement with the vendor who had filed a case against the company.

The founders have roped in BharatMatrimony founder & CEO Murugavel Janakiraman to mediate on their behalf with the vendor, Adiya CS, head of Jigsaw Solutions.

Janakiraman confirmed that he had indeed been mediating on behalf of the founders and had even spoken to Aditya on Thursday morning. “As one of the earliest entrepreneurs in the business, I decided to mediate but there has been no development so far,” he told BusinessLine.

He said he is willing to mediate again if both the vendor and the founders request him to do so.

Sources also said that Jigsaw Solutions had agreed to waive interest accrued on the principal amount of ₹1.7 crore in case of a settlement. It would also withdraw the case against the company.

On Wednesday, several start-up founders and VC funds including Flipkart founder Sachin Bansal and serial entrepreneur and co-founder of GrowthStory, K Ganesh, had condemned the arrest of Vasupal, stating that as it is a civil case, there is no reason to take the Stayzilla co-founder into custody.

Meanwhile, Aditya in an email to BusinessLine, said he was left with no option but to file a case. “Why only funded start-ups are immune? What about the fate of unfunded start ups like Jigsaw Solutions, a small proprietorship advertising agency run by a young man in his 20s? Can his business be allowed to sink just because a funded start-up defaults and disappears?” he asked.

He pointed out that the funded start-ups have little or no dues with Google or Facebook because the internet giants collect payment in advance. Else, they take the companies’ credit card details and, if they default, simply cut the lifeline.

“They also have big, powerful legal teams — something a small ad agency cannot afford. They can only turn to the legal agencies with a regular complaint. That is what Jigsaw did,” said Aditya.

He further said start-ups who are short of cash should not enter into contracts as they know they may not be able to clear the dues. But by entering into such contracts, they are actually committing frauds.

Stayzilla assured Jigsaw that it would pay its dues after receiving a $13-million third round funding. But it did not do so in spite of sending an audit confirmation report admitting it owed ₹1.56 crore. Instead, it used the fresh funds to release new advertisements without clearing existing dues, he claimed.