Karnataka HC extends stay on NCLT order initiating insolvency process against Flipkart

Karnataka HC extends stay on NCLT order initiating insolvency process against Flipkart

Bar & Bench

The Karnataka High Court has extended the stay earlier granted on the order passed by the National Company Law Tribunal (NCLT) Bangalore which had initiated the Corporate Insolvency Resolution Process (CIRP) against Flipkart India Pvt Ltd.

The High Court had initially stayed the order passed by the NCLT on October 25. In an order passed on October 31, the Single Judge Bench of Justice B Veerappa extended the stay till the next date of hearing.

Appearing for Flipkart before the High Court, Senior Advocate Dhyan Chinnappa argued that the NCLT has jurisdiction only in respect of debts and can only entertain cases where debts are payable. Since the respondent, CloudWalker Streaming Technologies, had filed a petition against Flipkart for damages, the same could not be entertained by the NCLT, Chinnappa contended.

The High Court, in an order passed on October 25, ordered a stay on the NCLT order passed on October 24.

CloudWalker, which engages in the business of import and supply of LED TVs, had moved the NCLT earlier this year for the recovery of a default amount of Rs 26,95,00,000 from Flipkart.

The dispute arose out of a supply agreement signed in December 2016 for import and supply of LED TVs between the two. Pursuant to the agreement, Flipkart received the first delivery of the first few batches of the LED TVs in January and March 2017, and promptly made payment for the same.

Subsequently, in an attempt to gain more profits, CloudWalker claimed that Flipkart “coerced” it into offering the products at a discounted rate. Since it was facing huge losses and liquidity crunch, CloudWalker agreed to it.

Demand for payment was raised by Cloudwalker based on purchase order emails, to no avail.

As of March 2018, CloudWalker claimed that Flipkart had failed to collect more than 70% of the stock ordered by it, and that the company was behind payment to the tune of Rs. 55 crore.

Due to the failure of Flipkart in fulfilling its commitment, CloudWalker was forced to unload the uncollected goods at heavily discounted marked down prices just so that it could remain afloat, it was submitted.

After hearing the parties and perusing the details of communication exchanged between them, the NCLT observed that it was clearly established that CloudWalker imported the goods as per purchased orders made by Flipkart, which committed default.

The NCLT also noted that Flipkart had not raised any dispute with regard to the alleged deficiency in services.

Observing that the plea which was filed as early as on July 22 could not be kept pending any longer only for the purpose of settlement, the NCLT thus ordered initiation of CIRP against Flipkart.

The NCLT nonetheless added that it is open for the parties to come with a settlement and move an application under Section 12 IBC.

[Read the orders]

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