NCLAT Overturns NCLT’s Order Against Dream11 Parent

SUMMARY

The NCLAT set aside insolvency proceedings against Dream11 parent Sporta Technologies

The Appellate Tribunal said that the NCLT, while admitting the insolvency plea, ignored the fact that the period from March 27, 2020 to March 26, 2021 was exempted under the IBC

The insolvency plea was filed by Reward Solutions in February for an alleged rent default of over INR 7.6 Cr

The National Company Law Appellate Tribunal (NCLAT) on Thursday (April 19) reportedly set aside insolvency proceedings against Sporta Technologies, the parent entity of fantasy unicorn Dream11, for an alleged rent default of over INR 7.6 Cr.

In its order, the Appellate Tribunal said that the National Company Law Tribunal (NCLT), while admitting the insolvency plea, ignored the fact that the period from March 27, 2020 to March 26, 2021 was exempted under the Insolvency and Bankruptcy Code, 2016, Moneycontrol reported.

The insolvency plea was filed by Reward Solutions in February. The company claimed that it entered a five-year lease and licence agreement with Sporta Technologies for two units in a tower in a business park in Mumbai in 2019. The agreement included a monthly licence fee of INR 49.8 Lakh for the initial three years and INR 57.3 Lakh for the following two years.

Alleging that Dream11’s parent failed to comply with the agreement, Reward Solutions sent it a demand notice under Section 10A of the Insolvency and Bankruptcy Code, 2016 in April 2021, citing outstanding licence fees totalling INR 7.61 Cr for a period between March 27, 2020 till April 2021.

The National Company Law Tribunal’s (NCLT) Mumbai bench admitted the insolvency plea on February 13, 2024.

As per reports, the NCLAT halted the insolvency process against Sporta Technologies the very next day on February 14 on an urgent petition moved by Dream11 cofounder and COO Bhavit Sheth.

The development comes at a time when Indian online gaming startups, including Dream11, are reeling under the impact of 28% GST levied on the sector. Amid this, Dream11 also received an INR 28,000 Cr GST notice from the Directorate General of Goods and Services Tax Intelligence (DGGI), Mumbai Zone.

Last year, it was also reported that Dream11 shut its corporate venture capital arm Dream Capital.

Despite these issues, the unicorn managed to onboard 5.5 Cr new users to its platform in 2023, taking its total user base to 21 Cr.

Meanwhile, its net profit jumped 32% year-on-year to INR 187.83 Cr in the financial year 2022-2023 (FY23) and operating revenue zoomed 66% to INR 6,384.5 Cr.