NCLT Quashes Akshay Kumar’s Insolvency Plea Against Cuemath

NCLT Quashes Akshay Kumar’s Insolvency Plea Against Cuemath

SUMMARY

The actor, who had entered an endorsement agreement with the edtech startup on March 8, 2021, sought to recover dues worth over INR 4.83 Cr via the initiation of a corporate insolvency resolution process

In its judgement, the NCLT said that this issue doesn’t qualify as a "debt" and thus is outside of its jurisdiction

The agreement stipulated Kumar to render his services in promoting the startup for a maximum of two days for a total of INR 8.10 Cr

The National Company Law Tribunal (NCLT) has dismissed an insolvency plea filed by actor Akshay Kumar against edtech startup Cuemath’s parent Cue Learn Pvt. Ltd. over non-payment of endorsement fee on January 7. 

The actor, who had entered an endorsement agreement with the edtech startup on March 8, 2021, sought to recover dues worth over INR 4.83 Cr via the initiation of a corporate insolvency resolution process. 

The agreement stipulated Kumar to render his services in promoting the startup for a maximum of two days for a total of INR 8.10 Cr. While the first installment of INR 4.05 Cr was paid on March 4, 2021, Kumar was supposed to get a “second payment” of INR 4.05 Cr plus GST by April 15, 2022 or seven days prior to the utilisation of the second day of his services. The actor alleged default in the second tranche of the payment. 

In its judgement, the NCLT said that this issue doesn’t qualify as a “debt” and thus is outside of its jurisdiction. 

“The jurisdiction of the NCLT is limited to adjudicating applications strictly within the framework of the IBC. The NCLT’s role is to oversee the insolvency resolution process for qualifying debts, and it cannot be expanded to encompass disputes of a contractual nature that do not fall under the operational or financial debt categories defined by the IBC. Accordingly, the NCLT is not the appropriate forum for adjudication of such claims,” the order read.

According to Kumar’s plea, he fulfilled his obligations on the first day as required, and the deliverable television commercials (TVCs) were utilised by CueMath on its social media platforms. However, the latter failed to make the second payment on the due date, “raising frivolous and contradictory defences, such as non-receipt of the invoice and lack of agreed dates for the second day”.

The startup’s counsel argued that the second tranche of payment was dependent on Kumar’s availability for a mutually agreed-upon second endorsement day. These dates were never proposed by the actor, which was a breach of the contract and thus negated his claim for the remaining payment. 

The startup also claimed to have sent the actor a mail on April 4, 2022 to request further discussion with the petitioner regarding the ambiguity in the contract terms. However, the actor didn’t respond directly or participate in any further discussions. Instead, he chose to issue a demand notice on June 20, 2022.

On this, the NCLT ruled that the second tranche of payment was contingent upon Kumar;s fulfilment of “certain conditions”. 

However, there is no documentary evidence on record to indicate that these conditions were fulfilled. “Consequently, the obligation to render services on the second day did not materialise as the necessary preconditions were not met. The lack of performance on the part of the OC (Operational Creditor) to provide the required services negates the assertion of an operational debt,” its order read. 

The ad over which the actor is seeking dues came at a time when the edtech space was flush with funds and startups were choosing high-profile personalities for advertisements. 

The time period in question, 2020-2022, saw the likes of Aamir Khan promote Vedantu in 2020, MS Dhoni promoting Unacademy. Not to mention, BYJU’S ad blitz involved big names like Amitabh Bachchan, Shah Rukh Khan and Lionel Messi. 

However, the edtech sector has been hit hard by a funding crunch for the last couple of years. Barring IPO-bound PhysicsWallah’s $210 Mn fund raise, the sector saw a fresh capital infusion of $358 Mn in 2024. In comparison, the sector saw a capital influx of $4.8 Bn in 2021. 

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