Why did Flipkart vendor CloudWalker take e-comm giant to NCLT

Our Bureau Bengaluru | Updated on November 06, 2019

HC reprieve comes after NCLT action on petition filed by supplier over ₹18-cr payment default

Karnataka High Court has stayed the order of the NCLT in favour of Flipkart after the tribunal initiated insolvency proceedings against the e-commerce company for defaulting on ₹18 crore payment to one of its suppliers.

“Karnataka High Court has stayed the order of the NCLT in favour of Flipkart. This is ongoing commercial litigation which we are challenging. At this stage, we have no further comments,” Flipkart spokesperson said in an email response. Flipkart also said it is not undergoing corporate insolvency resolution process and is continuing its operations as a going concern under its present management.

The Bangalore bench of NCLT had initiated a corporate insolvency resolution process against Flipkart India following a case filed by CloudWalker Streaming Technologies seeking CIRP against the e-commerce company on the ground that it had committed default on payment of ₹26.95 crore on supply of TVs.

According to Bar & Bench website which has posted the NCLT order, the dispute arose out of a supply agreement signed in December 2016 for import and supply of LED TVs between the CloudWalker and Flipkart. Pursuant to the agreement, Flipkart received the delivery of the first few batches of the LED TVs in January and March 2017 and made payment for the same. Thereafter Flipkart started avoiding taking delivery of the products by giving “feeble excuses” and CloudWalker, in good faith, warehoused them, the website said.

Subsequently, in an attempt to gain more profits, CloudWalker claimed that Flipkart “coerced” it into offering the products at a discounted rate. Since it was facing huge losses and liquidity crunch, CloudWalker agreed to it. Demand for payment was raised by Cloudwalker based on purchase order emails, to no avail.

As of March 2018, CloudWalker claimed that Flipkart had failed to collect more than 70 per cent of the stock ordered by it and it was behind payment to the tune of ₹55 crore. It was submitted that due to the failure of Flipkart in fulfilling its commitment, CloudWalker was forced to unload the uncollected goods at heavily discounted marked down prices just so that it could remain afloat.

Section 9 petition

CloudWalker then issued a demand notice in June 2019 under Section-8 of the Insolvency and Bankruptcy Code. However, there was no reply to the same. Subsequently, a Section-9 petition was filed by Cloudwaker. Flipkart, on the other hand, argued that there was no admitted debt or liability in the present instance as it had already paid an amount of ₹85,57,00,664 to CloudWalker.

It was argued that there were huge disparities with respect to the sums claimed and invoices raised. The illegal demands of CloudWalker would require a full-fledged trial, it was contended. It was also added that Flipkart has withheld an amount of approximately ₹42,96, 668 towards deficiency of services.

After hearing the parties and perusing the details of communication exchanged between them, the NCLT observed that it was clearly established that CloudWalker imported the goods as per purchased orders made by Flipkart, which committed default.

The NCLT also noted the Flipkart had also not raised any dispute with regard to the alleged deficiency in services.

Published on November 06, 2019

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