NCLT Grants 2-Week Time To Dunzo To Reach Settlement With Betterplace Over Pending Dues

In some relief for troubled hyperlocal startup Dunzo, the National Company Law Tribunal (NCLT) has reportedly granted the Reliance Retail-backed startup a time of two weeks to reach a settlement with its vendor Betterplace Safety Solutions over pending dues.

The latest extension will likely help Dunzo stave off new insolvency proceedings for the next couple of weeks. 

As per a report by Livemint, a bench comprising judicial member K Biswal and technical member Manoj Kumar Dubey granted the extension after Dunzo’s counsel sought a timeline of 14 days to negotiate a settlement. 

“We have been in serious settlement discussions with the lenders… We have [also] been receiving investments. We need two weeks till 20 June to try and resolve the matter,” the report quoted Dunzo’s counsel as saying. 

In retort, Betterplace’s lawyer reportedly told NCLT that the vendor has been hearing about a settlement for almost a year and added that the “level of confidence is missing”. Betterplace further sought “some protection” in the form of the company’s assets or else “nothing would be left for them under the IBC’s corporate insolvency resolution process”.

The Bengaluru bench of the tribunal will hear the matter next on June 19.

At the heart of the matter is Dunzo’s default on payments to Betterplace. The debt arises from a range of services used by the hyperlocal startup including background verification, recruitment, asset management, and merchandise. 

After cash-strapped Dunzo defaulted on the payments, Betterplace filed an insolvency application against the startup under Section 9 of the Insolvency and Bankruptcy Code (IBC) in February. 

Under Section 9 of the IBC, operational creditors can initiate insolvency proceedings following a payment default. However, there seems to be no clarity on the exact amount owed to the creditor.

The latest development comes a month after reports said that the cash-strapped startup is set to close a funding round after a year of deliberations. As per the reports, the startup would use the funds to clear pending liabilities, including employee salaries. 

The arrangement is also expected to “find safety for the company into perpetuity”, cofounder and CEO Kabeer Biswas told employees in an internal communication as per Livemint. Sources told the publication that Dunzo was in the final stages of raising $22Mn to $25 Mn in a mix of equity and debt from new and existing investors.

Founded in 2015 by Biswas, Suri, Mukund Jha, and Ankur Aggarwal, Dunzo connects consumers with nearby stores and facilitates deliveries of products including groceries, medicines, among others. 

Last year, the company re-pivoted back to its original hyperlocal model after a sharp increase in its cash burn. The startup has been grappling with fires on multiple fronts, including delayed salaries, multiple insolvency proceedings, mounting losses, and delayed payments to vendors. 

Last year, it also received legal notices from Google India, Nilenso, Clover Ventures, Facebook India, Cupshup, Koo, among others, for pending payments.. 

The Bengaluru-based startup’s loss surged to INR 1,801 Cr in the financial year 2022-23 (FY23) as against INR 464 Cr in the previous year. Revenue from operations grew 317% year-on-year to INR 226.6 Cr in the fiscal year ended March 2023.