NCLT gives Dunzo two weeks to settle dues with Betterplace Safety Solutions

Betterplace, one of Dunzo’s operational creditors, filed an insolvency application against the company under Section 9 of the Insolvency and Bankruptcy Code (IBC) in February. Section 9 allows operational creditors to initiate insolvency proceedings following a payment default. The creditor, however, did not disclose the exact amount it was owed.

NCLT granted the extension after Dunzo’s counsel asked for two weeks to reach a settlement. A bench led by Justices K Biswal and Manoj Kumar Dubey agreed to hear the matter next on 19 June.

“We have been in serious settlement discussions with the lenders... We have [also] been receiving investments. We need two weeks till 20 June to try and resolve the matter", said Dunzo’s counsel.

Betterplace’s counsel told the tribunal, however, that the creditor has been hearing about a settlement for almost a year, adding, “The level of confidence is missing." He also said the lenders needed some protection in the form of the company’s assets or else nothing would be left for them under the IBC’s corporate insolvency resolution process.

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Separately, one of Dunzo’s financial creditors has also filed an insolvency application against the company. Dunzo said, however, that it was close to reaching a settlement with this lender.

In November, Dunzo’s operational creditor Velvin Group, an Indian manufacturer of sustainable packaging solutions, initiated insolvency proceedings against the company. Its plea was later admitted by the Bengaluru NCLT.

More recently Lightbox, a venture-capital firm that holds 11.1% stake in the delivery firm, gave up its board seat at the company. Siddharth Talwar, a former co-founder and partner at Lightbox who held the board seat at Dunzo, left the venture-capital firm in March.

Dunzo close to striking a “transaction" to settle dues

Earlier this month we reported that Dunzo is in the final stages of closing a “transaction" with investors that the cash-strapped startup has been looking to raise for at least a year to clear pending liabilities, including salaries.

The arrangement is also expected to “find safety for the company into perpetuity", co-founder and chief executive Kabeer Biswas told employees in an internal communication, which Mint has seen.

According to a person aware of the developments, Dunzo is in late-stage talks to raise $22 million-$25 million in a mix of equity and debt from a clutch of new and existing investors.

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Dunzo did not confirm this, but Biswas in his message to employees said the company will be conducting reviews on 3 and 4 May to finalise the transaction, and that it had also negotiated its liabilities to settle for considerably lower amounts.

Dunzo, which is also backed by Google, is in the middle of a liquidity crisis that has over the past year forced it to pivot business models, delay salaries and vendor payments, and reduce its workforce.