Legal & Regulatory

Insolvency petition against Play Games24x7 dismissed

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.”

Business Gaming

Living Consumer files insolvency petition against RummyCircle

Exclusive Digital and affiliate marketing company Living Consumer Products Private Limited has filed an insolvency petition against online rummy website RummyCircle’s parent company Play Games24x7 Private Limited for alleged non-payment of pending dues.

Living Consumer Products, as an operational creditor, has filed the petition in the Mumbai bench of the National Company Law Tribunal initiating corporate insolvency process against Play Games24x7 for non-payment of dues for goods/services under Section 9 of the Insolvency and Bankruptcy Code, 2016.

The matter came up for hearing on 5th August, 2019 and the NCLT Bench asked Play Games24x7 to file its reply to Living Consumer’s claim by the next day, i.e. 6th August post which a rejoinder could be filed by Living Consumer Products.

The matter has now been listed for further hearing on 11th September, 2019 after all the replies have been filed.

Amit Vora, Director of Living Consumer Products declined to comment on the matter and stated, “As the matter is subjudice, I reserve my comments on this topic.”

Bhavin Pandya, CEO and co-founder of Play Games24x7 while declining to comment on the litigation alluded to the need to curb affiliate marketing fraud.

In an emailed statement he noted, “The affiliate marketing industry in India is rapidly evolving. With the increasing migration of services to the online medium, it is imperative that the online affiliate marketing industry also follows high standards and responsible business practices. One of the challenges faced by advertisers is affiliate fraud at all scales by some small or big online marketing affiliates.

This is not a new problem however in the more mature affiliate marketing industry in the West, both parties, the advertisers and the affiliates have understood the value of working with their interests aligned and therefore are naturally moving towards revenue sharing arrangements. This industry being new in India, these models are yet to evolve on the backdrop or more transparency and willingness to share data between stakeholders.

At RummyCircle and My11Circle, we are constantly improving our systems by running real time data science models to detect affiliate marketing fraud. The Company has also faced issues of misreported acquisition data and is able to now substantiate, with its own data, and take quick corrective action to mitigate losses and clean up the practices at the end of the affiliates. It is not surprising that some operators who look at short term gains, resist the idea of transparency for short term business objectives, however, this is not good for the health of the online marketing industry and eventually will destroy creativity and competition.

Given where the industry is right now, accountability of reporting relevant user information to detect fraud is a challenge due to lack of proper information sharing by the affiliates. The Company however is committed to use technology and data science to improve this industry and hopes that these steps help every stakeholder in the long run. The Company cannot comment on the specifics of a dispute with any vendor that is pending adjudication and it is appropriate to await the outcome of the adjudication process.”