Flipkart Says Karnataka High Court Stays NCLT Proceeding In Insolvency Case

Flipkart India said the Karnataka High Court has stayed the insolvency proceedings initiated by its operational creditor for unpaid dues worth Rs 26 crore.

The Bengaluru bench of the National Company Law Tribunal had admitted the insolvency application of CloudWalker Streaming Technologies and appointed Deepak Saruparia as the interim resolution professional, according to the tribunal’s order.

CloudWalker Streaming Technologies imported and supplied LED televisions to Flipkart India. After the first few batches of LED TVs, Flipkart India avoided taking delivery of the products citing lack of warehouse space on several occasions and at times didn’t take the delivery at all, CloudWalker Streaming Technologies said.

As of March 2018, Flipkart India failed to collect more than 70 percent of the stock ordered by it, CloudWalker alleged before the NCLT. The default of Rs 26 crore includes Rs 13.95 crore towards goods, Rs 5.25 crore of customer charges and Rs 7.75 crore of interest as of March 2019, the operational creditor said.

Flipkart India contested CloudWalker’s claims, arguing that it has already paid more than Rs 85 crore and is not liable to make any more payments. It said the Insolvency and Bankruptcy Code process is being used by CloudWalker as a coercive step in order to get Flipkart India to succumb to illegal demands. Though the supply agreement between them is not in dispute, CloudWalker failed to comply with several terms in order to claim the amount, Flipkart India said.

But the NCLT relied upon the email correspondence between Flipkart India and CloudWalker that established default on the part of the e-commerce company. The demand notice served by CloudWalker was not disputed by Flipkart India before any forum and so, existence of the default is established.

The parties had been given several opportunities to settle the case since July 22 when the insolvency application was first filed by CloudWalker and the case cannot be kept pending anymore, the NCLT said. And so, the tribunal admitted CloudWalker’s insolvency application and directed a moratorium prohibiting Flipkart India from transferring, alienating or disposing any assets.

The interim resolution professional has to submit the progress report to the NCLT on Nov. 25.

Flipkart India, however, said the Karnataka High Court has stayed the NCLT’s order in its favour. “This is an ongoing commercial litigation which we are challenging,” the company spokesperson told BloombergQuint.

(The copy has been updated with Flipkart India’s comment.)