Some of India’s most valuable tech companies are being dragged to insolvency court over payments disputes with their suppliers.
After Ola Electric was taken to insolvency court over alleged unpaid dues to its vehicle registration partner, Zomato too has been met with a similar charge. Zomato is facing an insolvency plea through a company named Nova Lifestyle, which alleges that Rs. 1.64 crore of dues were not paid to it. Nova Lifestyle had provided uniforms for Zomato delivery partners.
Nona Lifestyle has approached the NCLT to initiate the corporate insolvency resolution process against Zomato over alleged non-payment for supplied uniforms and merchandise, including ICC World Cup 2023 apparel. The National Company Law Tribunal (NCLT) has adjourned the case to April 3, requesting the petitioner to clarify its next steps.
Nona Lifestyle claimed that Zomato placed multiple orders in 2023 for rider uniforms, trousers, and World Cup jerseys. It is now accusing Zomato of delaying payments, and refusing deliveries citing storage issues. Nona Lifestyle also alleges that Zomato used threats and warnings” to pressure it into offering discounts and in fact refused to accept the remaining World Cup jerseys, citing a “failed” campaign, despite the jerseys being custom-made and unsuitable for other use.
Zomato, for its part, denies these allegations and rejects these claims. It says that Nona Lifestyle repeatedly missed agreed-upon delivery deadlines, resulting in penalties as per their contract. Zomato argued that the delays caused “substantial reputational and goodwill damage” and stated that it only paid for delivered jerseys after deducting penalties and adjusting the advance payment.
The courts will adjudicate on which company is in the right, but such disputes aren’t the best look for massive tech startups. Both Ola and Zomato are worth billions of dollars, but have been dragged to insolvency court over relatively trivial sums of money. Also, it’s possible that suppliers are trigger-happy about taking these companies to court, given how that the negative publicity affects them adversely — Ola Electric’s stock, for instance, fell over 7 percent after its insolvency case had been disclosed. The courts will get to the bottom of these issues, but top startups would do well to better manage their relationships with their supplier and partners — and prevent their business fallouts from reaching the glare of the public eye.