NCLT Bengaluru Bench Admits Corporate Insolvency Resolution Process Against Dunzo Digital Private Limited
Velvin Packaging Solutions' petition under Section 9 of the IBC succeeds; Arbitration clause in settlement agreement deemed no barrier.
In a landmark decision dated August 6, 2025, the National Company Law Tribunal (NCLT), Bengaluru Bench, has admitted Dunzo Digital Private Limited into the Corporate Insolvency Resolution Process (CIRP) following a petition by Velvin Packaging Solutions. The petitioner, an operational creditor, sought the initiation of CIRP under Section 9 of the Insolvency and Bankruptcy Code (IBC), 2016, due to non-payment of an operational debt amounting to Rs. 2,29,54,399.
The NCLT bench, comprising Shri Sunil Kumar Aggarwal and Shri Radhakrishna Sreepada, ruled that the existence of an arbitration clause in the settlement agreement between the parties does not preclude the initiation of insolvency proceedings when debt and default are established. The bench emphasized that post-default settlements do not alter the date of default or extinguish the original cause of action under the IBC framework.
The tribunal highlighted that Dunzo Digital failed to demonstrate any pre-existing dispute or substantial defense against the claims of Velvin Packaging Solutions. Despite the respondent's assertion of a settlement agreement and partial payment, the tribunal noted that the settlement agreement does not override the statutory provisions of the IBC for recovering pre-existing operational debts.
The decision also underscores that settlements made after a default do not change the date of default or preclude the enforcement of pre-existing operational debts. The tribunal declared a statutory moratorium under Section 14 of the IBC, prohibiting all suits, asset transfers, and recovery actions against Dunzo Digital.
Shri Srinivas Vaidyanath Subramaniam has been appointed as the Interim Resolution Professional (IRP) to oversee the CIRP process. The tribunal has directed the IRP to undertake necessary actions under the IBC, including forming a Committee of Creditors and submitting regular progress reports.
The tribunal's decision marks a significant interpretation of the interplay between arbitration clauses and the IBC, reinforcing the primacy of insolvency proceedings in cases of established debt defaults.
Bottom Line:
Insolvency and Bankruptcy Code, 2016 - Corporate Insolvency Resolution Process (CIRP) - Operational creditor's application under Section 9 for initiation of CIRP against corporate debtor allowed - Mere existence of arbitration clause in settlement agreement does not bar proceedings under IBC when debt and default are established - Post-default settlements do not alter the date of default or extinguish the original cause of action.
Statutory provision(s): Insolvency and Bankruptcy Code, 2016, Sections 9, 14
