Thursday, May 23, 2024

NCLT Issues Warning to Dunzo Over INR 4 Cr Unpaid Dues: Financial Troubles Deepen for the Hyperlocal Delivery Startup


NCLT Warns Dunzo Of Moratorium Over Unpaid Dues Worth INR 4 Cr

The National Company Law Tribunal (NCLT) has delivered a stern warning to Dunzo, a prominent hyperlocal delivery startup, indicating that it could face a moratorium if it does not promptly respond to a notice concerning unpaid dues amounting to INR 4 Cr. The litigation arises from a claim by Betterplace Safety Solutions against Dunzo for outstanding payments, bringing the matter to the attention of the NCLT in Bengaluru.

Dunzo has been given a week to address the notice, with a follow-up hearing scheduled for April 1. This development follows a spotlight on Dunzo’s financial troubles, including substantial losses and a series of legal notices from vendors for unresolved payments, signifying deepening concerns over its operational sustainability.

The bench, including judicial member Justice T Krishnavalli and technical member Manoj Kumar Dubey, revealed that Betterplace Safety Solutions accused Dunzo of owing INR 4 Cr, highlighting the startup’s unresponsiveness despite previous notices. The claim is supported by email correspondences and is put into context with Dunzo’s notable financial losses reported in recent news.

Betterplace drew parallels between this case and that of BYJU’S, another venture facing scrutiny for its financial practices. Dunzo, on its part, has acknowledged the debt while seeking more time to respond to the allegations. The company expressed concerns over the potential diminishing of its assets, given its precarious financial status.

In response, Betterplace’s counsel advocated for a status quo on Dunzo’s assets to prevent any possible alterations that could endanger third-party interests. This led the tribunal to question the rationale behind opposing such a move, aimed at protecting the interests involved and maintaining the current state of affairs regarding the company’s assets.

Dunzo’s liabilities stem from a suite of services provided by Betterplace, including background verification, recruitment of delivery personnel, asset management, and merchandise supplies, under a master service agreement and platform subscription agreement. Founded in 2015 by Kabeer Biswas, Mukund Jha, Dalvir Suri, and Ankur Aggarwal, Dunzo has become a key player in connecting consumers with nearby stores for the delivery of groceries, medicines, food, and other daily essentials. The launch of Dunzo Daily marked its venture into the quick commerce sector, which exacerbated its financial losses.

The company’s financial woes have been compounded by a series of legal challenges over the past year, including an insolvency plea admitted by the NCLT against Dunzo, filed by Velvin Packaging Solutions Private Limited, a leading Indian manufacturer of sustainable packaging solutions. The continual emergence of legal notices from vendors, including tech giants and local suppliers, over unpaid dues totaling approximately INR 11.4 Cr paints a grim picture of Dunzo’s struggle to navigate through operational and financial turbulence.

In the financial year 2022-23, Dunzo’s fiscal deficit soared to INR 1,801 Cr from INR 464 Cr in the preceding year. Despite a significant increase in operating revenue, the startup’s expenses have surged, leading to concerns over its long-term viability in the competitive quick commerce and hyperlocal delivery market.

As stakeholders closely watch the unfolding situation, the upcoming hearing on April 1 will likely offer further insights into the future directions for Dunzo amid its challenging financial position and the ongoing legal scrutiny over its business practices.

Alex Sterling
Alex Sterling
Alex Sterling is a seasoned journalist with over a decade of experience covering the dynamic world of business and finance. With a keen eye for detail and a passion for uncovering the stories behind the headlines, Alex has become a respected voice in the industry. Before joining our business blog, Alex reported for major financial news outlets, where they developed a reputation for insightful analysis and compelling storytelling. Alex's work is driven by a commitment to provide readers with the information they need to make informed decisions. Whether it's breaking down complex economic trends or highlighting emerging business opportunities, Alex's writing is accessible, informative, and always engaging.

Read more

Latest News