NCLAT Sets Aside NCLT Order, Directs Fresh Hearing in Culver Max Insolvency Case Against Fintech Firm

Introduction

India’s insolvency appellate framework has once again underlined the importance of procedural fairness after the National Company Law Appellate Tribunal (NCLAT) set aside an earlier order passed by the National Company Law Tribunal (NCLT) in an insolvency case involving Culver Max Entertainment and a fintech company. The appellate tribunal has directed that the insolvency petition be reheard afresh, offering the broadcaster another opportunity to pursue its claim after curing procedural defects.

The ruling reinforces a key principle under the Insolvency and Bankruptcy Code (IBC): insolvency proceedings should not be dismissed solely on technical grounds when such defects are curable. For the fintech ecosystem, where commercial disputes increasingly spill into insolvency forums, the decision carries broader implications around compliance, documentation, and legal preparedness.

Background of the Case

Culver Max Entertainment, formerly known as Sony Pictures Network India, had filed an operational creditor insolvency petition under Section 9 of the IBC against Rechargekit Fintech, an Odisha-based fintech firm. The petition alleged non-payment of dues arising from a commercial arrangement between the two entities.

However, the Cuttack bench of the NCLT dismissed the petition at the admission stage, citing deficiencies in the filing. The tribunal held that Culver Max had failed to submit a valid board resolution or proper authorisation empowering the filing of the insolvency application. On this basis, the NCLT concluded that the petition was not maintainable and rejected it without examining the merits of the claim.

Aggrieved by the dismissal, Culver Max challenged the order before the NCLAT, arguing that the NCLT should have allowed it an opportunity to rectify the procedural lapse instead of outright rejection.

NCLAT’s Ruling and Legal Reasoning

The NCLAT agreed with Culver Max’s submissions and found fault with the approach adopted by the NCLT. The appellate tribunal observed that procedural defects — particularly those relating to authorisation and documentation — are curable in nature and should not result in immediate dismissal of insolvency applications.

Importantly, the NCLAT highlighted that Section 9(5)(ii) of the IBC specifically contemplates a scenario where defects in an insolvency application may be rectified within a stipulated timeframe. Denying an applicant the opportunity to cure such defects, the tribunal noted, defeats the intent of the Code and compromises procedural fairness.

As a result, the NCLAT:

• Set aside the NCLT’s dismissal order
• Remanded the matter back to the NCLT, Cuttack bench
• Directed that the petition be reheard afresh after curing procedural defects
• Clarified that the NCLT must consider the case on merits, without being influenced by its earlier dismissal

Crucially, the appellate tribunal did not express any view on the validity of the insolvency claim itself, keeping the merits entirely open.

Why This Decision Matters

1. Reinforcement of Procedural Justice

The ruling sends a clear message that insolvency forums must prioritise substantive justice over technical formalism. While procedural compliance remains critical, tribunals are expected to facilitate correction of curable errors rather than terminating proceedings prematurely.

This is particularly significant in complex commercial disputes involving fintech firms, where documentation, authorisations, and multi-layered corporate structures are common.

2. Implications for Fintech Companies

For fintech startups and digital businesses, the ruling is a reminder that insolvency exposure is real and actionable, even when disputes arise from operational or service-related contracts. A petition dismissed once on technical grounds can be revived, extending legal uncertainty and reputational risk.

Fintech companies must ensure:

• Clear contractual documentation
• Timely dispute resolution mechanisms
• Strong legal responses to insolvency notices

Failure to do so may lead to prolonged litigation under the IBC framework.

3. Operational Creditors Gain Clarity

Operational creditors — including media companies, technology vendors, and service providers — often face hurdles when pursuing insolvency claims due to procedural complexities. This ruling strengthens their position by affirming that technical lapses should not extinguish substantive claims if corrected promptly.

Fintech and Insolvency: A Growing Intersection

The case also highlights a broader trend: fintech firms are increasingly being drawn into insolvency proceedings as the sector matures and commercial disputes intensify. Unlike early-stage startups, today’s fintech companies engage with large enterprises, broadcasters, banks, and infrastructure partners — increasing their exposure to operational creditor claims.

As regulatory scrutiny rises and capital becomes more disciplined, insolvency proceedings are likely to become a more common enforcement tool in fintech-related disputes.

What Happens Next

With the case now remanded:

• Culver Max will be required to rectify procedural defects, including filing proper authorisation documents
• The NCLT will re-examine the insolvency petition on merits
• Rechargekit Fintech will have the opportunity to contest the claim substantively

The outcome of the rehearing could determine whether insolvency proceedings are admitted or dismissed — a decision that could materially impact both parties.

Conclusion

The NCLAT’s decision to set aside the NCLT order in the Culver Max insolvency case underscores the judiciary’s evolving approach to insolvency litigation — one that balances procedural discipline with fairness and access to justice.

For fintech companies, the ruling is a cautionary signal: procedural dismissals are no longer a safe exit, and insolvency exposure can resurface if technical defects are cured. For creditors, it reaffirms confidence in the insolvency framework as a viable enforcement mechanism.

As fintech and corporate law continue to converge, such rulings will shape how disputes are litigated — and how seriously compliance and governance are treated across India’s digital economy.

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