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NCLT Bengaluru initiates insolvency process against Flipkart

NCLT Bengaluru initiates insolvency process against Flipkart

Aditi Singh

The National Company Law Tribunal (NCLT) Bengaluru has initiated the Corporate Insolvency Resolution Process (CIRP) against Flipkart India Pvt Ltd.

The order was passed by a bench of Judicial Member Rajeswara Rao Vittanala in a Section 9 plea preferred by CloudWalker Streaming Technologies Pvt Ltd.

Deepak Saruparia has been appointed as the interim resolution professional of Flipkart. The 180-day moratorium has been imposed.

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 TV 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.

However, thereafter Flipkart started avoiding taking delivery of the products by giving “feeble excuses” and CloudWalker, in good faith, warehoused them.

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 it 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.

CloudWalker then issued a demand notice in June 2019 under Section 8 of the Insolvency and Bankruptcy Code. However, there was no reply to the same. Subsequently, a Section 9 petition was filed by Cloudwaker.

Flipkart, on the other hand, argued that there was no admitted debt or liability in the present instance as it had already paid an amount of Rs 85,57,00,664 to CloudWalker.

It was argued that there were huge disparities with respect to the sums claimed and invoices raised. The illegal demands of CloudWalker would require a full-fledged trial, it was contended.

It was also added that Flipkart has withheld an amount of approximately Rs 42,96, 668 towards deficiency of services.

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

It said,

“…it is settled position of law and in order to avoid to initiate CIRP, in an Application/Petition filed, under Section 9 of the Code, there should be pre-existing dispute. The facts and circumstances as detailed supra, there is no pre-existing dispute..”

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.

The matter will be heard next on November 25.

CloudWalker was represented by Advocates Ajit Anekar and Urvi Vaidya.

Flipkart was represented by Senior Advocate Dhyan Chinnappa with Advocates Chinmay J Mirji, and Charitha V.

Read the Order: