Exclusive An insolvency petition filed by online affiliate marketing company Living Consumer Products Private Limited against RummyCircle and My11Circle parent company Play Games24x7 Private Limited was dismissed by the Mumbai bench of the National Company Law Tribunal (NCLT).
The NCLT proceedings filed by Living Consumer against the online rummy and fantasy gaming company was first reported by Glaws in August this year.
The two-member bench of NCLT while dismissing the petition, noted that since Play Games24x7 had replied to the demand notice sent by Living Consumer and also raised a dispute against the company, even before insolvency proceedings were threatened to be initiated, a petition for initiating Corporate Insolvency Resolution Process (CIRP) cannot be entertained.
The bench noted that corporate insolvency proceedings can be initiated in terms of Section 9(1) of the Insolvency and Bankruptcy Code, 2016 only if the corporate debtor does not respond with a notice of dispute within 10 days of receiving a demand notice from an operational creditor.
The NCLT bench observed that Living Consumer was required to provide marketing leads and drive traffic to Play Games24x7’s online gaming portal and a fee was to paid for the same based on the geographical location of the user.
Living Consumer raised an invoice of Rs. 6.35 crores for the services provided between 1st-15th December, 2018 which was not paid by the RummyCircle parent company.
Play Games24x7 while declining to make the payment served a legal notice to Living Consumer citing fraud in delivering the services.
According to the NCLT order, RummyCircle, during the course of its internal investigation is believed to have found out that its former Chief Marketing Officer, Sachin Uppal, and his immediate kin received Rs. 6.04 lakhs from Living Consumer as well as gift hamper from Living Consumer CEO Amit Vora as a bribe.
Play Games24x7 had further alleged that Living Consumer has made unauthorised use of its brand name and over-stated its fees by fraudulently passing off users from one state as being users of another state, as per a forensic investigation report by Deloitte Touche Tohmatsu India LLP.
Based on these facts, NCLT while rejecting the insolvency petition, noted that the tribunal has not decided on the merits of the claims made by Living Consumer, which can be agitated before an appropriate court of law.
In August 2018, Bhavin Pandya, CEO and co-founder of Play Games24x7 had in his comments on the insolvency case, had alluded to the prevalence of affiliate marketing fraud while declining to comment on the merits of the case.
Reacting to the current order passed by NCLT, Pandya said, “From the NCLT order, it is clear that the case wasn’t decided on merit but because of a pre-existing dispute. The NCLT’s view was to not entertain the matter and therefore dismissed it.”