NCLT | Company Petition fit for Corporate Insolvency Resolution Process if Corporate Debtor fails to deny insolvency charges with proof

National Company Law Tribunal (NCLT): Justice Rajeswara Rao Vittanala (Judicial Member) allowed the Company Petition filed by CloudWalker Streaming Technologies Pvt. Ltd. (Corporate Creditor) under Section 9 of the Insolvency and Bankruptcy Code (IBC), 2016 read with Section 6 of the Insolvency and Bankruptcy(Application to Adjudicating Authority) Rules, 2016 against Flipkart India Pvt. Ltd. (Corporate Debtor). The instant petition sought initiation of the Corporate Insolvency Resolution Process (CIRP) on the ground that Flipkart had committed default for an amount of Rs 26.95 crores. 

Anjit Anekar along with Ms. Urvi Vaidya appeared for the petitioners while the respondents were represented by Senior Counsel Dhyan Chinappa, Chinmay. J.  Mirzi and Charitha V.

CloudWalker had entered into a Supply Agreement with Flipkart, but the latter started to delay in taking deliveries and in some cases did not collect them at all. The ramification of this delay was that the Creditor CloudWalker started facing heavy financial losses. When the Debtor Flipkart defaulted in collecting more than 70 per cent of the stock ordered by it, CloudWalker threatened to invoke the arbitration clause of the Supply Agreement. 

The petitioners CloudWalker alleged that the Corporate Debtor company is commercially insolvent and poses a threat to commercial morality. The respondents Flipkart argued that they had already paid in excess of 85 crores towards the invoices raised by the Creditor CloudWalker, and therefore the question of being commercially insolvent was baseless, frivolous and bears mala fide intentions. 

The fact that the respondent company Flipkart had no material proof to deny the charges of committing default and the e-mail exchange presented before the Tribunal, tilted the case in favour of the petitioner CloudWalker.

After examining the facts of the case, the Tribunal opined that the Debtor had committed the default in question and the instant petition met all the essentials of proviso 2 of Section 9 of the IBC. Therefore, the Tribunal allowed the initiation of CIRP in respect of Flipkart India Pvt. Ltd. (Corporate Debtor). [CloudWalker Streaming Technologies (P) Ltd. v. Flipkart India (P) Ltd.,  2019 SCC OnLine NCLT 671, decided on 24-10-2019]

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