NCLAT grants relief to Dream11 parent company in insolvency case

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The National Company Law Appellate Tribunal (NCLAT) has granted relief to Sporta Technologies, the parent company of the fantasy gaming platform Dream11, by setting aside the corporate insolvency resolution process (CIRP) initiated against it. This decision comes as a result of rejecting a petition by Reward Solutions, a move that restores Sporta Technologies to its pre-insolvency stage.

As reported by The Economic Times, The NCLAT ruling, issued on April 18, 2024, concluded that the default date for the debt claimed by Reward Solutions fell within the timeline protected by Section 10A of the Insolvency and Bankruptcy Code, 2016. This section prohibits the initiation of CIRP for defaults occurring between March 25, 2020, and March 25, 2021, aiming to shield businesses affected by the COVID-19 pandemic.

Reward Solutions had filed a petition before the National Company Law Tribunal (NCLT), Mumbai, alleged a default of Rs. 7.61 crore by Dream11 regarding a lease and license agreement. This agreement was executed between Reward Solutions and Sporta Technologies, with Dream11 being admitted into insolvency by NCLT in February, prompting Sporta Technologies to appeal to NCLAT.

The NCLAT concluded that the NCLT had erred in admitting the CIRP application by Reward Solutions, stating, “NCLT had committed an error in admitting Section 9 CIRP application by the impugned order dated February 9, 2024,” and subsequently set aside the February order.

Furthermore, the NCLAT directed Sporta Technologies to compensate the Resolution Professional (RP) for the costs incurred in managing the company during the period from February 9, 2024, to the date of the ruling.

The legal battle traces back to a Leave and License Agreement executed between Reward Business Solutions Private Ltd. and Sporta Technologies Private Limited in December 2019. The agreement covered premises leased to Sporta Technologies in Mumbai for a period of five years, with defined payment terms.

In response to the ruling, Bhavit Sheth, the co-founder and COO of Dream11, stating that the decision reaffirms the company’s commitment to fair business practices and compliance with regulatory frameworks.