{"url_path":"/sec/zcar/10-k/2026/item-3","section_key":"item-3","section_title":"Item 3 Legal Proceedings**","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-07-14","source_url":"https://www.sec.gov/Archives/edgar/data/1854275/0001213900-26-078029-index.html","accession_number":"0001213900-26-078029","cik":"0001854275","ticker":"ZCAR","issuer_name":"Zoomcar Holdings, Inc.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1854275/0001213900-26-078029-index.html","primary_entity_key":"0001854275","primary_entity_name":"Zoomcar Holdings, Inc."},"word_count":3277,"has_tables":true,"body_markdown":"**Item\n3. Legal Proceedings**\n\n \n\nExcept as described below, we are not currently subject to any material\nclaims, lawsuits, arbitration proceedings, administrative actions, government investigations and other legal and regulatory disputes and\nproceedings (collectively, “**Legal Proceedings**”) We have received communications relating to certain legal proceedings,\nas described in “*Risk Factors - A former employee of Zoomcar India has instituted a wrongful termination suit and\nclaims that certain Zoomcar options have vested*.”, “*Risk Factor* - *The founder and former CEO of the Company\nhas initiated a civil complaint against the Company contesting the reasons for his termination and has raised certain other claims with\nregards to his ownership of the Company and compensation for termination of his employment.,” and “The ACM Letter Agreement\nimposes significant cash payment, securities issuance, capital raise participation and other obligations on the Company, and ACM’s\ndiscretionary right to terminate the Courtesy Standstill Period creates significant ongoing risk to the Company”* “*The\nReimer Settlement Agreement and -related issuances will result in additional dilution to our investors”* We may become subject\nto other Legal Proceedings over time or from time to time, in the ordinary course of our business and as our business continues to grow\nand expand over time. Becoming involved with Legal Proceedings, regardless of the outcome, may result in substantial cost and diversion\nof our resources, including our management’s time and attention.\n\n \n\nAs\na result of our business operations in India, we are regularly subject to legal proceedings, many of which are de minimis in nature and\namount and the majority of which relate to local tax matters. Many of these tax and vehicle accident-related Legal Proceedings are pending\nbefore various forums in India and involve localized practices and interpretations of regulatory matters that make the ultimate outcomes\nor resolution of these Legal Proceedings inherently uncertain and difficult to predict. Management’s views and estimates related\nto these matters may change in the future, as new events and circumstances arise and the matters continue to develop.\n\n \n\n*Litigation\nwith Former Consultant*\n\n \n\nOn\nAugust 4, 2023, a former consultant to Zoomcar filed a complaint against Zoomcar in the United States District Court for the Southern\nDistrict of New York. The complaint contains breach and anticipatory breach of contract claims arising from a letter agreement, effective\nas of May 2020, between Zoomcar and the former consultant, which engagement letter was terminated by Zoomcar in January 2022. The plaintiff\nalleges that the terms of the engagement letter entitle him to cash and warrants to purchase Zoomcar shares in relation to prior Zoomcar\ntransactions and upon consummation of the proposed Business Combination. The complaint seeks declaratory relief affirming the plaintiff’s\nalleged continuing right to receive compensation from Zoomcar under the engagement letter, together with attorneys’ fees, costs\nand interests, as well as punitive damages. Zoomcar and former consultant executed a Settlement Agreement in February 2025, settling\nthe disputes between them. In connection with this settlement, affiliates of the former consultant were issued, in the January/February\nOffering, shares of Common Stock, January/February Pre-Funded Warrants, January/February Series A Warrants and January/February Series\nB Warrants with an aggregate value of $1,482,000 (the “Former Consultant Settlement”). The action was terminated on February\n19, 2025.\n\n \n\n71\n\n \n\n*Litigation\nwith Former Employee*\n\n* *\n\nIn\nFebruary 2023, a former employee of Zoomcar India instituted a suit before the City Civil and Sessions Judge at Mayo Hall, Bengaluru\nagainst Zoomcar India, Zoomcar and IOAC challenging his termination, claiming approximately $400,000 in damages and claiming that 100,000\noptions to purchase shares of Zoomcar have vested. On March 3, 2023, the City Civil and Sessions Judge at Mayo Hall, Bengaluru, issued\nan interim injunction to restrain each of Zoomcar and IOAC from “alienating or dealing” the 100,000 shares (without giving\neffect to the reverse splits and the conversion ratio for the business combination) of Zoomcar claimed by the former employee while the\nsuit was pending. Zoomcar believes that such claims are baseless and is attempting to have the interim order vacated. In addition, Zoomcar\nIndia filed an application in the former employee’s suit, seeking that IOAC be deleted from the array of parties in the suit, inter\nalia since (i) IOAC is neither a necessary nor a proper party to the suit; (ii) no reliefs have been sought by the former employee from\nIOAC; and (iii) there is no cause of action against IOAC.\n\n \n\n*Litigation\nwith the Founder and Former CEO*\n\n \n\nOn\nSeptember 26, 2024, we received a copy of a complaint filed with the United States District Court for the District of Delaware wherein\nour founder and former CEO Greg Moran has challenged the Company’s termination of his employment for cause, effective as of June\n18, 2024. Mr. Moran has contested the facts leading up to the grounds on which his termination was based and has also claimed that this\nalleged wrongful termination has deprived him of his vested right to 8% of the Company’s outstanding equity that he claims was\nowed to him under his Employment Agreement. He has also claimed that in connection with his termination he is entitled to the payment\nof certain amounts for unused paid leave during his employment with Zoomcar, along with certain other compensation he claims to be owed\nunder the terms of his Employment Agreement, including “Owed Severance” equal to approximately $72,000. In total, Mr. Moran\nseeks damages of at least $238,000 plus damages associated with the 8% of shares. He also seeks damages under the New York Labor Law,\nunder which he seeks liquidated damages equal to 100% of any unpaid wages. He claims that all of the above constitute wages under New\nYork Labor Law.\n\n \n\nZoomcar believes that the termination of Mr. Moran’s employment for\ncause was proper in accordance with the terms of his Employment Agreement. Mr. Moran’s case in the District Court was dismissed\non account of Mr. Moran’s stated intention to refile the case in Delaware Superior Court. Mr. Moran refiled his lawsuit in the Superior\nCourt of the State of Delaware on November 1, 2024. On November 27, 2024, the Company filed a motion to dismiss certain of the causes\nof action for failure to state a cause of action, and the briefing on that motion was filed on January 7, 2025. Mr. Moran filed opposition\nto Zoomcar’s motion on February 5, 2025 and Zoomcar filed a reply in further support of its motion on February 20, 2025. Zoomcar’s\noral arguments in its motion to dismiss were heard on April 29, 2025 The Court has requested additional briefing with respect to the Company’s\nmotion to dismiss Mr. Moran’s Wage claim. The additional briefing was due on August 15, 2025. The court granted the motion to dismiss\nMr. Moran’s quasi-contractual claims and reserved decision on the balance of the motion. On November 20, 2025, the court further\ngranted the motion to dismiss Mr. Moran’s tortious interference with contract claim and breach of New York labor law claim.\n\n \n\nFurther on March 16, 2026,\nthe Company and Mr. Moran entered into a settlement agreement (the “Settlement Agreement”) resolving the litigation. The Settlement\nAgreement provides for the Company’s payment of $150,000 in installments and mutual releases of all claims, with no admission of\nliability by any party. The matter will be dismissed with prejudice upon completion of the settlement payments. *Refer to Exhibit 10.55\nfor the terms of settlement agreement with Mr. Greg Moran which is incorporate by reference herewith.*\n\n \n\n72\n\n \n\n*Litigation\nwith ACM*\n\n** **\n\nThe Company received two default notices from ACM. The first notice was\nissued on May 22, 2024 which stated that the Company is in default of the terms of the Unsecured Convertible Note issued to ACM on December\n28, 2023(“Note”), since the Company had entered into an equity line arrangement with White Lion Capital LLC, a variable rate\ntransaction, without the prior consent of ACM. Further, on June 25, 2024, the Company received the second notice of default from ACM stating\nthat the Company has incurred indebtedness in the form of $3,600,000 in principal amount of notes in a transaction involving Aegis Capital\nCorp. (“Aegis”) acting as the placement agent prior to which, the consent of ACM was not obtained. As per the terms of the\nACM note, in the event of any default, all accrued but unpaid interest plus liquidated damages and other amounts thereof, shall become\nimmediately due and payable in cash. On November 7, 2024, ACM filed a notice of motion for summary judgement in in lieu of complaint against\nZoomcar in New York courts for accelerated payment of $5,997,832.72 due under the ACM note and related legal expenses, pursuant to breach\nof the terms of the note. ACM alleged that, two “Events of Default” (as defined in the Note) had occurred thereby entitling\nACM to full and accelerated payment of the Note. The first was a Form 8-K, filed by Zoomcar on May 9, 2024, which allegedly disclosed\nthat on May 6, 2024, Zoomcar had entered into an equity line arrangement and “Variable Rate Transaction” (as defined in the\nNote) with White Lion Capital LLC (“White Lion”). The second was a Form 8-K, filed by Zoomcar on June 21, 2024, which allegedly\ndisclosed that on June 18, 2024, Zoomcar had incurred a form of debt that was not “Excluded Debt” (as defined in the Note)\narising from its placement agent agreement with Aegis Capital Corp. without ACM’s prior consent. The Note generally provides that,\nupon the occurrence of an Event of Default, all accrued but unpaid interest plus liquidated damages and other amounts thereof shall become\nimmediately due and payable to the Note holder. On January 14, 2025, Zoomcar filed opposition to the Motion. In relevant part, Zoomcar\nchallenged the fact allegations concerning: (i) the first Form 8-K by tendering to the Court evidence confirming that the subject transaction\nwith White Lion in fact had been terminated and the underlying filing of a Form S-1 registration statement contemplated in that transaction\nwas never effectuated; and (ii) the second Form 8-K by tendering to the Court evidence confirming that the subject transaction involved\nExcluded Debt. The effect of the foregoing is the transactions were excluded from the definitions of Events of Default and extinguished\nACM’s alleged entitlement to accelerated payment under the Note. Additional defenses were also presented by Zoomcar to the Motion.\nOn March 28, 2025, New York County Supreme Court Justice granted a summary judgment in favor of ACM in the amount of $5,656,086.72, as\nwell as default interest in the amount of $346,481.00, post-judgment interest at the statutory rate, attorneys’ fees, and costs.\nThe issue of attorneys’ fees was referred to a special referee to report and recommend on submission from the parties. On May 9,\n2025, the Court reduced the award of attorneys’ fees and costs to $12,000.00. On April 22, 2025, the Company filed a Notice of Appeal\nseeking to reverse the March 28, 2025, order granting summary judgment in favor of ACM. Zoomcar intends to vigorously prosecute its appeal.\nOn May 11, 2026, Zoomcar executed settlement terms with ACM via a letter agreement.  Under the settlement terms, Zoomcar will pay\nACM $2,500,000 in cash by October 31, 2026, with the remaining $3,500,000 balance converting into equity securities during the Company’s\nnext financing round. Additionally, ACM is entitled to at least 10% of the gross proceeds from any future capital raises—or a higher\npercentage if granted to another creditor—and has agreed to a courtesy standstill through March 31, 2027, which it can terminate\nat any time. In exchange, Zoomcar has submitted a confession of judgment, and has withdrawn all pending appeals, along with a complete\nlist of its assets and bank accounts being handed over to ACM.\n\n \n\n*Litigation\nwith Prior Placement Agent*\n\n \n\nOn\nMarch 14, 2025, the Company received a demand letter (the “Demand Letter”) from the attorneys for the placement agent (the\n“Prior Placement Agent”), with which the Company had entered into an engagement agreement on or about May 23, 2024 (the “Prior\nPlacement Agreement”). A claim has been made, pursuant to the terms of the Prior Placement Agreement, for the payment of cash fees\nand the issuance of warrants to the Prior Placement Agent, as and for “tail fees” owed in connection with any financings\nwithin 18 months after the expiration or termination of the Prior Placement Agreement. The claims are made with respect to the sales\nof securities in the offerings closed by the Company in June 2024, November 2024, December 2024 and February 2025. The demand is for\n7% of the aggregate gross proceeds received by the Company in each of those offerings from investors on a “tail list” provided\nby the Prior Placement Agent and warrants to purchase up to 7% of the aggregate number of shares of common stock issued in each of the\nofferings to investors on the “tail list,” which warrants are to have the same terms and warrants offered to investors in\neach of the offerings, with an exercise price equal to 125% of the applicable offering price.\n\n \n\nWith\nrespect to the offering closed in June 2024, the claim is made with respect to one investor claimed to be on the “tail list,”\nfor a cash fee of 7% of the aggregate gross proceeds received from such investor and 7% warrant coverage, with respect to that investor,\nbut no specific amount is claimed. With respect to the offering closed in November 2024, there is a claim for a cash fee of $77,000 and\nwarrants to purchase an aggregate of 17,900 shares of common stock at an exercise price of $107 per share, for the same investor.”\nWith respect to the offering closed in December 2024, there is a claim for a cash fee of 7% of the aggregate gross proceeds received\nfrom the same investor and 7% warrant coverage, with respect to that investor, but no specific amount is claimed. A similar claim was\nalso made to the extent that such investor participated in the offering closed in February 2025.\n\n \n\nThe\nCompany has taken necessary financial provisions of $185,077 as recorded in the “Other expense/(income), net” in the Consolidated\nFinancial Statements for the year ending on March 31, 2025.\n\n \n\n73\n\n \n\n*Litigation\nwith Series E Investors*\n\n \n\nOn\nAugust 2025, the Company received a notice from the legal representatives of Reimer Family Partnership, L.P., Michael Schiavello, and\nVasilios Takos (“Series E Investors”) who held warrants to purchase Series E Preferred Stock of Zoomcar, Inc. pursuant to\nthe warrant agreement dated May 12, 2021. The warrant holders had raised a dispute regarding the non-delivery of shares following the\nsubmission of their respective notices of exercise. Thereafter the Series E Investors preferred to file a lawsuit against the Company\nin the Supreme Court of State of New York, County of New York.\n\n \n\nOn\nApril 14, 2026, the Supreme Court of the State of New York, County of New York, issued an Order to Show Cause with Temporary Restraining\nOrder (“TRO”) against the Company in the matter of *Reimer Family Partnership, L.P. et al. v. Zoomcar Holdings, Inc.*\n(Index No. 651695/2026). Pursuant to the terms of the TRO, pending a formal hearing on the matter, the Company and any persons acting\nin concert with it are strictly restricted from taking certain corporate actions. Specifically, the order enjoins the Company from: (i)\nseeking or obtaining stockholder approval to increase its authorized shares; (ii) issuing shares in connection with a proposed warrant\nexchange; (iii) consummating any proposed private placement or related equity financing; (iv) issuing shares of common stock to insiders,\nofficers, directors, or affiliates, including proposed issuances to the Company’s Chairman; (v) effecting a reverse stock split;\nand (vi) transferring or dissipating any assets other than in the ordinary course of business. The Court has scheduled a formal hearing\non the Order to Show Cause for May 7, 2026.\n\n \n\nTo remove the operational restraints\nfrom the TRO, on May 1, 2026, the Company entered into this settlement and general release agreement (“Reimer Settlement Agreement”\nas filed herewith as Exhibit 10.54) with the Series E Investors assuring certain staggered issuance of Common Stock by the Company to\nthem during January 2027 and the settlement further contractually obligated the Series E Investors to immediately file a stipulation vacating\nthe TRO so that Zoomcar can continue with its Bridge Financing process. More specifically, subject to a Section 3(a)(10) fairness order,\nthe Company is required to issue 39,000,000 shares of common stock to the plaintiffs on January 1, 2027 (or within five business days\nof the order). The Series E Investors are subject to a 13-month leak-out period, and their total consideration from share sales and true-ups\nis capped at $2,000,000. As a backstop to these obligations, the Company executed a $2,500,000 Confession of Judgment, which remains subject\nto the $2,000,000 total recovery cap.\n\n \n\nThe related TRO\nwas vacated on May 4, 2026. Following a fairness hearing, on June 1, 2026, the court entered an order approving the fairness of the terms\nand conditions of the settlement for purposes of Section 3(a)(10) of the Securities Act.\n\n \n\n*Other\nMatters* \n\n** **\n\nZoomcar\nutilizes a set of Terms and Conditions (“**T&Cs**”) tailored specifically for each of the jurisdictions in which we\noperate which includes privacy policy, platform use policy, terms and conditions for Host and Guest. These T&Cs are in the form of\na clickwrap agreement which lays down the duties, risks, and the liabilities of Zoomcar, Hosts and the Guests in relation to use of services\nrendered by Zoomcar through its Platform. These T&Cs *inter alia* cover the eligibility criteria for listing/leasing of vehicles,\nfacilitation of booking, cancellation and incident reporting via the platform, processing of payments/refunds etc. and they further lay\nout the risks, rights and obligations of the Hosts and the Guests with respect to handling of the vehicles, responsibility for damage,\naccident, traffic violations and/or for any incidents in violation of applicable law.\n\n \n\nIn\naddition to the T&Cs, due to regulatory requirements in India, an additional lease agreement is executed between the Host and the\nGuest which encompasses the allocation of risks and responsibilities of the Hosts and Guests with respect to listing and use of the relevant\nvehicle. The execution of such lease agreement is facilitated through the Zoomcar Platform in the form of a clickwrap agreement.\n\n \n\nGiven\nthat Zoomcar operates as a peer-to-peer car sharing marketplace which facilitates sharing of vehicles between the Hosts and Guests through\nits platform, the responsibility and liability of Zoomcar under the T&Cs is limited to being a facilitator of such transaction and\nthe obligations for liabilities arising out of listing and/or use of the vehicle booked through the platform is on the Guests and the\nHosts. The use of the Zoomcar platform and sharing of vehicle through the platform is undertaken by the Host and Guests entirely at their\nown risk. Zoomcar’s liability is further capped under the T&Cs at approximately $120 (across all jurisdictions) for any claims\narising out of the use of Zoomcar platform. However, Zoomcar, as part of the facilitation services to Hosts and Guests, also provides\nfor trip-based vehicle protection whereby Zoomcar collects and pools the “value-add” damage coverage fee to be applied to\nthe costs of repairs or other damage or loss of vehicle in the event a Host vehicle is involved in an incident, such as an accident,\nduring a trip and this value-add trip protection fee pool may not always help set off the damage claims. Therefore, Zoomcar often remains\nat a risk of residual claims that it may have to absorb in absence of a third-party insurance. See the section titled “*Risk\nFactors - Insurance Risks Related to Our Business*,” as our business is subject to certain risks in absence of third-party insurance\ncover that could have a material impact on our business."}