NCLT Initiates Insolvency Proceedings Against Dunzo Digital for Rs. 1.91 Crore Debt

NCLT Initiates Insolvency Proceedings Against Dunzo Digital for Rs. 1.91 Crore Debt

Introduction

The National Company Law Tribunal (NCLT), Bengaluru Bench, comprising Shri Sunil Kumar Aggarwal (Member-Judicial) and Shri Radhakrishna Sreepada (Member-Technical), has admitted the Corporate Insolvency Resolution Process (CIRP) petition against Dunzo Digital Private Limited for a debt of Rs. 1.91 crore.

Factual Background

The operational creditor, Velvin Packaging Solutions, filed a Section 9 IBC petition seeking initiation of CIRP against Dunzo Digital Private Limited for defaulting on a debt of Rs. 2.29 crore, inclusive of interest. The creditor raised 107 invoices for goods delivered to the corporate debtor, amounting to Rs. 6.81 crore. After adjusting payments made, an outstanding amount of Rs. 1.91 crore remained.

Procedural Background

The demand notice issued by the operational creditor went unanswered, and attempts at settlement failed. Despite multiple opportunities to file objections, the corporate debtor submitted objections beyond the prescribed time, which were accepted by the NCLT.

Issues

The primary issues before the court were:

• Existence of Debt and Default: Whether the debt and default have been established.
• Pre-existing Dispute: Whether a pre-existing dispute exists between the parties regarding the nature and quality of goods supplied.
• Arbitration Clause: Whether the existence of an arbitration clause bars a Section 9 petition.

Contentions of Parties

Operational Creditor: Velvin Packaging Solutions argued that the corporate debtor failed to pay the outstanding debt.

Corporate Debtor: Dunzo Digital Private Limited contended that the petitioner concealed the fact of an existing dispute regarding the nature of goods supplied and that the dispute should have been referred to arbitration.

Reasoning & Analysis

The NCLT observed that:

• Vague Dispute: The corporate debtor raised a vague dispute regarding the nature and quality of goods without providing evidence.
• Pre-existing Dispute: As per the Hon'ble Supreme Court's decision in Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd., a pre-existing dispute under Section 8(2)(a) of the Code should be supported by contemporaneous evidence.
• Post-default Settlement: Post-default settlement does not alter the date of default or extinguish the cause of action.
• ●Arbitration Clause: The mere existence of an arbitration clause does not bar a Section 9 petition when debt and default have been established.

Implications

The NCLT's decision highlights the importance of providing evidence to support claims of pre-existing disputes and the limited impact of post-default settlements on CIRP proceedings. The judgment also underscores the principle that the existence of an arbitration clause does not necessarily bar a Section 9 petition when debt and default have been established.

In this case the petitioner was represented by Mr. Ajinkya Kurdukar with Mr. Abhishek D.H, Advocates. Meanwhile the respondent was represented by Mr. Kumar Anurag Singh with Mr. Zain A. Khan and Mr. Mohd. Abran Khan, Advocates.