NCLAT asks IRP of Dream 11 to maintain it as a going concern; not to take steps for insolvency

The National Company Law Appellate Tribunal has directed the interim resolution professional of Sporta Technologies, which operates the fantasy sports platform Dream 11, not to take any steps towards insolvency and keep the company as a going concern. The appellate tribunal said it has already stayed the Corporate Insolvency Resolution Process (CIRP) of the company.

"We only clarify that IRP is directed not to take any steps in the CIRP, however, IRP being in the place shall keep the company as a going concern," the NCLAT said in its order.

The NCLAT, on February 14, stayed the NCLT Mumbai bench order to initiate a corporate Insolvency Resolution Process (CIRP) against Sporta Technologies.

It had stayed the NCLT order over an urgent petition moved by Dream11 co-founder and COO Bhavit Sheth. Dream 11 is the title sponsor of the IPL T20 cricket league also.

The NCLT had directed to initiate CIRP against Dream 11 over a petition filed by its operational creditor Reward Solutions under section 9 of the Insolvency & Bankruptcy Code (IBC), claiming dues of Rs 7.61 crore.

It had also appointed Madan Bajrang Lal Vaishnawa as IRP for Sporta Technologies. Reward Solutions itself is going through an insolvency resolution process, and the plea was filed by its resolution professional.

In 2019, a license agreement was executed between Reward Business Solutions, the licensor, and Sporta Technologies. It had leased a premise in Mumbai for five years to Sporta Technologies for which terms of payment were defined. However, it received a demand note of Rs 7.61 crore on April 20, 2021, for a period of March 27, 2020, till April 2021.

Opposing the demand, Sports Technologies, in the petition filed before the appellate tribunal, said the NCLT, in its order, ignored the fact that the demand "period from March 27, 2020, to March 26, 2021, is squarely covered/exempted under Section 10A of the Insolvency and Bankruptcy Code, 2016".

Section 10A mandates no application for initiation of a corporate insolvency resolution process (CIRP) can be filed against any debtor by any financial and operational creditor for any default arising on or after March 25, 2020, for a period of one year.

This was a special provision inserted by the government in the IBC to help the companies after the economic activities had resumed post-lockdown in phases.