Flipkart gets stay on insolvency proceedings initiated against it at NCLT

CloudWalker Streaming, a Mumbai-based supplier of LED TVs, alleged Flipkart did not honour a purchase agreement and had not paid dues totalling Rs 26.95 crore

Flipkart has obtained a stay order on insolvency proceedings initiated against the e-commerce firm by the National Company Law Tribunal (NCLT) in a case involving alleged withholding of dues to a seller on its platform.

CloudWalker Streaming, a Mumbai-based supplier of LED TVs, has alleged the Flipkart did not honour its purchase agreement and had not paid dues totalling to Rs 26.95 crore. The firm moved NCLT and had petitioned that Flipkart be recommended for insolvency under Insolvency and Bankruptcy Code (IBC).

On October 24, accepting the petitioner’s argument, the Bengaluru bench of NCLT ordered initiation of insolvency proceedings. Flipkart followed up with a writ petition in the Karnataka High Court and a day later obtained a stay on the NCLT order, a Flipkart spokesperson told Business Standard.

In its next hearing held on October 31, the Karnataka HC ordered continuation of the stay. The date of the next hearing has not been set yet. “In view of the above, it is clarified that as on date, Flipkart is not undergoing corporate insolvency resolution process and is continuing its operations on a going concern basis under its present management,” the company said in an email statement.

The matter pertains to an agreement between CloudWalker and Flipkart that dates back to December 2016. CloudWalker, which sells TV under Cloud TV brand, had alleged that Flipkart had signed the agreement to purchase stock worth Rs 103.62 crore but only bought goods worth Rs 85.57 crore, and that too after many delays.

After receiving two batches of TVs — in January and March 2017 — Flipkart stopped taking deliveries on the pretext of lack of warehousing space, which in piling up of unsold inventory with the seller, according to claims in the order copy dated October 24 posted on the NCLT website.

Further, “in an attempt to gain profit out of the goods ordered, (Flipkart) coerced the operational creditor (CloudWalker) to offer a discount on the LED TVs, which were already imported and warehoused by the operational creditor on behalf of the corporate debtor (Flipkart). The operational creditor facing huge losses and liquidity crunch agreed to offer the said discount…,” as per CloudWalker’s claim in the court document.

Flipkart also delayed payments over several occasions in 2017 and as on March 2018, had failed to pick up 70 per of the stock it ordered, alleges the petitioner.

In its response, Flipkart said that it paid Rs 85.57 crore to CloudWalker, as per what it claims was the original purchase agreement, and is not liable to make any further payments. “Further, the petitioner has failed to produce any PO’s (purchase order) or invoices in support of its alleged claims. This clearly shows that the alleged claim of Rs 26,95,00,000 is false and the same is denied by the respondent,” Flipkart is quoted as saying in the court document.

It also said that invoking IBC proceeding is a coercive step by CloudWalker to get Flipkart to succumb to illegal demands.

This is not the first time Flipkart has had tussle with a seller on its platform. Back in May, the e-commerce firm locked horns with Vishal Gondal’s smart-watch company GOQii, which alleged Flipkart was offering unsustainable discounts on its products. The start-up sued Flipkart in a Mumbai court, alleging that its devices were sold at around 70 per cent discount on the retail price, much more than the two sides had originally agreed upon. However, the matter was subsequently settled out of court.