Dream11 insolvency proceedings halted by NCLAT

SUMMARY

The National Company Law Appellate Tribunal (NCLAT) has halted insolvency proceedings against Dream11, providing relief amidst a dispute with Reward Solutions over outstanding dues. This ruling ensures Dream11's continued operations and marks a victory, albeit uncertainties persist as both parties seek resolution.

The National Company Law Appellate Tribunal (NCLAT) has issued a reprieve for Dream11, India's leading fantasy sports platform. The tribunal has directed the interim resolution professional (IRP) to maintain Dream11's operations and halt any steps towards insolvency.

Background of the Dispute

This development comes after Reward Solutions, an operational creditor of Dream11's parent company Sporta Technologies, filed a petition under the Insolvency and Bankruptcy Code (IBC) in December 2023. Reward Solutions claimed outstanding dues of Rs 7.61 crore related to a 2019 license agreement for a Mumbai office space.

NCLT Order and Dream11's Appeal

The National Company Law Tribunal (NCLT) Mumbai bench initially sided with Reward Solutions and directed initiating a Corporate Insolvency Resolution Process (CIRP) against Sporta Technologies. However, Dream11 co-founder Bhavit Sheth challenged this order with the NCLAT, arguing that the claimed dues fell under a special provision of the IBC.

NCLAT's Ruling: Relief for Dream11

The NCLAT has upheld Dream11's appeal. Recognizing the validity of their argument, the tribunal clarified that the disputed period (March 27, 2020 – March 26, 2021) falls under Section 10A of the IBC. This section, introduced during the pandemic, offers temporary protection from insolvency proceedings for defaults occurring within that specific timeframe.

What This Means for Dream11

The NCLAT's ruling allows Dream11 to continue its operations as usual. The IRP appointed by the NCLT is now directed to maintain the company as a "going concern," essentially ensuring its ongoing business activities. This is a significant victory for Dream11, which remains the title sponsor of the Indian Premier League (IPL).

Uncertainties Remain: Dispute Resolution Needed

While the NCLAT's order provides immediate relief for Dream11, the underlying dispute with Reward Solutions remains unresolved. Both parties will need to reach a settlement or face further legal proceedings to determine the legitimacy of the claimed dues.

Looking Ahead: Business Continuity and Growth

With the insolvency threat temporarily averted, Dream11 can now focus on its core business activities and explore future growth opportunities. This development is likely to be welcomed by Dream11's millions of users, employees, and stakeholders in the Indian fantasy sports ecosystem.