Karnataka High Court Stays National Company Law Tribunal Order Which Initiated Solvency Proceedings Against Flipkart

The Karnataka High Court has stayed a recent order passed by the Bengaluru bench of the National Company Law Tribunal (NCLT) which had initiated solvency proceedings against Walmart-owned online retailer Flipkart India.

“Karnataka High Court has stayed the order of the NCLT in favor of Flipkart. This is an ongoing commercial litigation which we are challenging. At this stage, we have no further comments,” Flipkart spokesperson said in an email response.

Flipkart had approached the Karnataka High Court after the NCLT initiated insolvency proceedings against the Walmart owned e-commerce company for allegedly defaulting on a Rs 18 crore payment to one of its suppliers.

The Bengaluru bench of the NCLT had initiated Corporate Insolvency Resolution Process (CIRP) against Flipkart India under the Insolvency and Bankruptcy Code, 2016, appointing Deepak Saruparia as Interim Resolution Professional.

The case was filed by Cloudwalker Streaming Technologies seeking CIRP against Flipkart on the ground that it had defaulted on payment of Rs 26.95 crore for supply of LED TVs.

In its petition, Cloudwalker had told NCLT that Flipkart has failed to collect all the TVs it had ordered, failed to pay the excess charges and costs as promised as well as failed to honor its commitment.

Cloudwalker had claimed that due to Flipkart's failure to fulfill its commitment, it was forced to unload the uncollected goods at heavily marked down prices, simply in order to remain afloat.

Cloudwalker had stated that it had sent a demand notice to which there has been no reply from Flipkart which “consistently and persistently failed, omitted and neglected to discharge its admitted and acknowledged debt and liability”.

Cloudwalker stated in a petition that it is apparent that the corporate debtor company Flipkart is commercially insolvent and is unable to pay its debts. The corporate debtor company is not economically viable and poses a threat to commercial morality, Cloudwalker’s petition stated.

However, Flipkart had argued in the NCLT that Cloudwalker’s petition is not maintainable either in law or on facts and it is liable to be rejected with exemplary costs.

Flipkart had stated that it is a profit making company with sufficient financial strength and is actively doing business. It has already paid Rs 85.57 crore and the allegation that it has no money to pay its liabilities or debt is “baseless, frivolous, bereft of truth and filed with malafide intentions,” Flipkart stated.