NCLT Pulls Up Cash-Strapped Dunzo For Failing To Reach Settlement With Creditors

Reliance Retail-backed hyperlocal delivery startup Dunzo has come under fire from the National Company Law Tribunal (NCLT) for failing to reach a settlement with its creditors.

The Bengaluru bench of the NCLT observed today (September 27) that although Dunzo was given 3 months to resolve its dispute with its creditors, it has still not reached a settlement with them, Mint reported. 

The tribunal insisted that Dunzo had “enough time” to reach a settlement with its creditors and refused to hear the company’s objections to the insolvency cases lodged against it. The NCLT has reportedly directed Dunzo to file an interlocutory application if it wants its objections to be heard. 

Two of Dunzo’s creditors — Invoice Discounters of Dunzo Digital and Velvin Packaging — previously moved the NCLT, seeking initiation of insolvency proceedings against the company for unresolved payments.

In January, Invoice Discounters of Dunzo Digital filed an application with the NCLT, alleging that the startup had cleared only 50% of the part payment. The exact amount Dunzo owes its creditors is unknown.

The development comes at a time when Dunzo is mired in troubles from a severe cash crunch to layoffs to bankruptcy. Last month, it was reported that the Bengaluru-based startup laid off 150 employees across supply and market verticals to cut costs.

Dunzo saw its losses widen over 3X to INR 1,801 Cr in FY23 from INR 464 Cr in the preceding fiscal. The financial turmoil caused delays in salary payments for both current and former employees, as well as outstanding dues to vendors.

Founded in 2015 by Kabeer Biswas, Suri, Mukund Jha, and Ankur Aggarwal, Dunzo connects consumers with nearby stores and facilitates deliveries of products including groceries, medicines, and food, among other daily needs. Its foray into the quick commerce space with Dunzo Daily led to a sharp increase in its cash burn.

Earlier this year, the NCLT had warned Dunzo that it would impose a moratorium on the hyperlocal delivery startup if it failed to promptly address a notice over unpaid dues worth INR 4 Cr that it owed to Betterplace Safety Solutions.

Dunzo has received multiple legal notices from its vendors for payment of outstanding dues amidst its struggles to continue its operations due to a severe cash crunch.

Last year, the startup received legal notices from Google India, Nilenso, Clover Ventures, Facebook India Online Services Private Limited (FBI), Cupshup, Koo and Glance for the same. Dunzo’s outstanding dues to these vendors stand at around INR 11.4 Cr.

At a time when Dunzo is facing insolvency proceedings, its cofounder and former chief technology officer Mukund Jha is reportedly in talks to raise INR 50 Cr to INR 80 Cr from Together fund for its new company GenAI Venture.