Insolvency Resolution Process Against Flipkart

A petition filed by CloudWalker Streaming Technologies Pvt. Ltd. against Flipkart India has been allowed by the National Company Law Tribunal (NCLT), Bengaluru Bench. The petition was filed under the Insolvency and Bankruptcy Code (IBC), 2016 and the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016.

The petition alleges a default of approximately Rs. 26.95 crores by the online shopping portal Flipkart India. The famous online retailer is owned by Walmart and CloudWalker is a Mumbai based LED TV retailer.

In this petition, CloudWalker alleges non payment of dues by Flipkart, despite repeated requests and demands. CloudWalker alleged that Flipkart did not follow the terms of a Supply Agreement with CloudWalker. CloudWalker claimed that this resulted in heavy financial losses. This was due to default on the part of Flipkart in collection of majority of the stock ordered through it. Apparently, Flipkart failed to take delivery of the stock by giving irrelevant excuses. Later, Flipkart forced CloudWalker in to providing the stock at discounted prices. CloudWalker, however, agreed to this as it was suffering from huge financial crunch. But, despite that, Flipkart failed to collect majority of the stock and also did not make payment. Because of this, CloudWalker was forced to release the stock at very low prices.

Flipkart did not even reply to the demand notices issued by CloudWalker under the Insolvency and Bankruptcy Code. Hence, CloudWalker was forced to approach the NCLT. In its counter, Flipkart stated that they had, in fact, paid more than 85 crores to CloudWalker already and was not liable to pay anything more. Flipkart also said that there was a dispute about the amount claimed by CloudWalker through its invoices. Thus, Flipkart stated that the dispute was of a civil nature which would need detailed trial examination of evidence. However, Flipkart could not deny the allegations of default made by CloudWalker.

After filing of the petition in NCLT, CloudWalker and Flipkart were also given many chances to settle the dispute. But, there was no mutual compromise between them. Finally, NCLT decided that the matter cannot be kept pending for very long.

The NCLT examined all the evidence filed by CloudWalker and decided in their favour. The Court came to the conclusion that Flipkart had, indeed, committed the default. The Court also held that Flipkart had issued sale orders for the stock and then, failed to collect it. By its order of 24th October, 2019, the Court directed initiation of Corporate Insolvency Resolution Process against Flipkart. An Insolvency Resolution Professional was appointed by the Court for the same.

Flipkart, has, however, given statements in the media that they have approached the Karnataka High Court. It has also stated that the High Court has granted temporary relief in favour of Flipkart. Flipkart has also given a statement that as on date, no insolvency process is being conducted and it is running its normal operations.

It appears that this is not the first time that Flipkart has been dragged into this kind of litigation. It seems that, in May 2019, it was also engaged in a similar battle with GOQii, a Mumbai based smart watch company. In that case also, the argument against Flipkart was that it offered huge discounts on retail price. It was stated that this was against the agreement between Flipkart and GOQii. But this matter was later on settled between the parties before any decision by the Court.

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