Reward Solutions filed the insolvency plea against Sporta Technologies for an alleged rent default of over INR 7.6 Cr
In its order, the NCLT said that Reward Solutions effectively proved the presence of both "operational debt" and "default", while the Dream11 parent acknowledged its liability
The Tribunal appointed an interim resolution professional for the case and asked Sporta Technologies to deposit INR 2 Lakh towards the initial cost of the insolvency process
The Mumbai bench of the National Company Law Tribunal (NCLT) has admitted an insolvency plea against Sporta Technologies, the parent company of gaming unicorn Dream11, for an alleged rent default of over INR 7.6 Cr.
The insolvency plea was filed by Piyush Jani on behalf of Reward Solutions Pvt Ltd. As per the court filings, Reward Solutions 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 outlined a monthly licence fee of INR 49.8 Lakh for the initial three years and INR 57.3 Lakh for the following two years. It also stipulated a lock-in period of 33 months, which meant that Sporta Technologies could not terminate the agreement till 27.09.2022, as per the court filings.
Reward Solutions contended that Sporta Technologies consistently defaulted on payment of the licence fee right from the beginning of the agreement. Consequently, the company sent a demand notice under the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 to Sporta Technologies in April 2021, citing outstanding licence fees totalling INR 7.61 Cr
As per the plea, the Dream11 parent failed to comply with the demand notice and this prompted Reward Solutions to file the insolvency plea.
In response to the demand notice, Sporta Technologies said it lost the “rightful opportunity” to negotiate the licence fees due to the impact of the then ongoing Covid-19 pandemic and confusion with regards to ownership of the leased premises with Reward Solutions or a third party named Mangalam Vanijya Private Limited.
However, in an order passed earlier this month, the tribunal recognised Sporta Technologies as a corporate debtor. It said Reward Solutions has effectively proven the presence of both “operational debt” and “default” committed by the corporate debtor, while Sporta Technologies acknowledged its liability.
“… it is concluded that the Company Petition satisfies all legal requirements for admission including the pecuniary, territorial and subject matter jurisdiction and the same is also filed well within the limitation period of 3 years. Considering the above facts, we are of the considered view that this Petition deserves to be admitted under Section 9 of the Code,” the NCLT said.
The bench appointed an interim resolution professional for the case and asked the Dream11 parent to deposit INR 2 Lakh towards the initial cost of the insolvency process.
Founded by Harsh Jain and Bhavit Sheth in 2008, Dream11 reported a 32% rise in its net profit to INR 187.83 Cr in the financial year 2022-2023 (FY23) from INR 141.97 Cr in the previous fiscal year.
It logged a 66% jump in operating revenue to INR 6,384.49 Cr in FY23 from INR 3,840.75 Cr in the previous financial year.
Amid the tax upheaval in the online gaming space, Dream11’s filings also mentioned that it received a show cause notice of INR 28,294.19 Cr under Section 74 of the Central Goods and Service Tax Act, 2017 in September 2023 from the Directorate General of GST Intelligence, Mumbai (DGGI).