Insolvency court admits case against Flipkart but high court orders stay
Photo Credit: Reuters

A tribunal in Bengaluru has ordered to start insolvency proceedings against Flipkart India Pvt. Ltd for a payments default, but the online retailer says it has secured a stay order from the Karnataka High Court.

The Bengaluru bench of the National Company Law Tribunal (NCLT) admitted a case filed by Mumbai-based CloudWalker Streaming Technologies Pvt. Ltd against Walmart Inc.-owned Flipkart for a default of Rs 26.95 crore.

CloudWalker, which imports and supplies LED TVs on Flipkart's online platform, dragged the company to the NCLT in July earlier this year after not receiving payment for the imported TVs as per their supply agreement.

In its order dated October 24, the NCLT admitted CloudWalker’s petition and appointed an insolvency professional to oversee the insolvency resolution process for Flipkart under the Insolvency and Bankruptcy Code (IBC).

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

The NCLT had observed that both the parties had failed to resolve the matter amicably. It noted that it was still open to the parties settling the issue even after admission of the case under the IBC.

The NCLT said Flipkart had “consistently and persistently failed” to pay its debt “despite vigorous follow-ups”. It also asked Deepak Saruparia, the resolution professional, to submit a report on November 25.

Previously, CloudWalker had issued a notice to Flipkart and invoked an arbitration clause of their supply agreement. Thereafter, Flipkart threatened to scrap the deal and not collect the remaining shipments unless CloudWalker withdrew the notice.

Flipkart said it was not liable to pay any further. It argued that the petition was an "abuse of law" and an attempt to use IBC proceedings as a coercive step to "arm-twist" the company to succumb to CloudWalker’s illegal demands.

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