NCLAT halts NCLT Mumbai’s order to initiate CIRP against Dream11 owner Sporta Technologies

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The National Company Law Appellate Tribunal (NCLAT) intervened on Wednesday, halting the NCLT Mumbai bench’s decision to commence a corporate Insolvency Resolution Process (CIRP) against Sporta Technologies, the parent company of the popular fantasy sports platform Dream11.

The NCLAT directed the Interim Resolution Professional (IRP), appointed by the NCLT following the suspension of Dream11’s board, to refrain from taking any further actions until the next hearing, scheduled for February 23.

A three-member bench issued a notice to the IRP of Sporta Technologies and the Resolution Professional of Reward Business Solution, instructing them to respond within a week. The NCLAT’s order specified that the appeal would be listed for February 23 and that the previous decision would remain suspended until then, with no actions to be taken by the IRP.

This development has its origins from an urgent plea filed by Dream11‘s co-founder and COO Bhavit Sheth.

During the proceedings, senior advocate Arun Kathpalia, representing Sporta Technologies, emphasized the impending Indian Premier League (IPL) season, stressing that the ongoing legal proceedings could disrupt the company’s preparations. Kathpalia also offered to deposit the disputed amount, citing uncertainties regarding the payment recipient.

The NCLT had initiated the CIRP against Dream11 based on a petition from its operational creditor, Reward Solutions, claiming dues amounting to Rs 7.61 crore.

Notably, Reward Solutions itself is undergoing insolvency resolution, and its resolution professional initiated the petition against Dream11.

The dispute revolves around a license agreement signed in 2019 between Reward Business Solutions and Sporta Technologies, wherein the former leased a premises to the latter in Mumbai for five years. Reward Solutions received a demand for Rs 7.61 crore covering the period from March 27, 2020, to April 2021.

Sporta Technologies, in its petition before the appellate tribunal, contended that the NCLAT had overlooked the provisions of Section 10A of the Insolvency and Bankruptcy Code, which exempts defaults occurring after March 25, 2020, from CIRP initiation for a year. This provision was introduced by the government to support companies post-lockdown.

Learned counsel representing the Appellant argued that the Operational Creditor’s application was ineligible due to the provisions of Section 10A, which the Adjudicating Authority failed to acknowledge in its order. Additionally, it was highlighted that although the Respondent had issued a fresh notice under Section 8 on January 23, 2023, and applied for the withdrawal of the Section 9 petition to file a fresh application, no decision was made on this application.

The issue was deemed worthy of further examination, prompting the issuance of notice. The counsel for the Operational Creditor acknowledged receipt of the notice, while notice was also issued to Respondent No.1.

In response, the counsel for the Respondent requested a week’s time to file an Additional Affidavit, which was granted by the tribunal. The Respondent’s counsel was instructed to file a Reply/Additional Affidavit within the stipulated week, and the Appeal was scheduled for hearing on February 23, 2024.

The legal battle underscores the complexities surrounding corporate insolvency and regulatory compliance within India’s dynamic business landscape.