Zomato Averts Insolvency Threat: NCLT Dismisses Nona Lifestyle’s INR 1.64 Cr Payment Dispute Claim

Tribunal Rules Against B2B Manufacturer on Procedural Grounds, Citing Failure to Serve Proper Notice Under IBC Regulations

In a significant legal victory for food delivery giant Zomato, the National Company Law Tribunal (NCLT) has dismissed an insolvency petition filed by B2B manufacturer Nona Lifestyle over alleged unpaid dues amounting to INR 1.64 crore. The decision offers much-needed relief to the Deepinder Goyal-led company as it navigates through challenging business conditions. The NCLT bench, comprising Judicial Member Ashok Kumar Bharadwaj and Technical Member Reena Sinha Puri, ruled on March 3 that the petition was not maintainable as it failed to meet essential procedural requirements under the Insolvency and Bankruptcy Code (IBC).

Understanding the Legal Proceedings

The dismissal came in response to Nona Lifestyle’s application seeking restoration of an insolvency plea originally filed in October 2024. According to the tribunal’s findings, the petition was fundamentally flawed as the petitioner had not served the mandatory notice under Section 8 of the IBC before initiating insolvency proceedings. The bench determined that without proper documentation confirming adherence to this critical legal prerequisite, the petition could not be entertained. This procedural oversight proved fatal to Nona Lifestyle’s case, resulting in the dismissal of their application to restore previously rejected insolvency proceedings.

The Commercial Dispute Behind the Legal Battle

The conflict between the two companies traces back to 2023, when Nona Lifestyle secured substantial orders from Zomato for manufacturing apparel – specifically t-shirts and trousers – intended for Zomato’s employees and delivery partners during the ICC World Cup 2023 campaign. According to Nona Lifestyle’s allegations, they had fulfilled their commitment to manufacture and deliver the ordered items in installments as per the agreed terms. However, they claimed that Zomato subsequently refused to accept deliveries and even threatened to demand discounts on the products. Zomato presented a sharply contrasting account of events, asserting that the manufacturer had unilaterally altered delivery schedules and consistently failed to meet critical deadlines. The food delivery platform claimed these failures resulted in “substantial reputational and goodwill damage” that jeopardized their entire World Cup marketing campaign.

History of the Legal Confrontation

The legal dispute has traveled a winding path through the tribunal system. Nona Lifestyle first approached the NCLT in October 2024, seeking to initiate insolvency proceedings against Zomato. That initial petition was dismissed on grounds of non-prosecution – essentially because the petitioner failed to actively pursue the case. Undeterred, Nona Lifestyle filed a second application with the NCLT approximately one month later, requesting the restoration of the insolvency proceedings. It was this restoration attempt that the tribunal has now rejected based on procedural deficiencies. While Nona’s legal representatives reportedly characterized Zomato’s objection regarding the absence of proper notice as a “hyper-technical” argument, the tribunal upheld the legal necessity of following established procedural requirements under the IBC framework.

About the Petitioner: Nona Lifestyle

Nona Lifestyle operates as a B2B procurement-as-a-service platform that connects manufacturers and suppliers to procure and deliver industrial products. The company serves various sectors including fast-moving consumer goods (FMCG), hospitality, and logistics, among others. Its business model centers on facilitating efficient procurement and supply chain solutions for corporate clients.

Zomato’s Ongoing Business Challenges

While this legal victory provides some breathing room for Zomato, the company continues to face significant business challenges. Recent quarterly results reveal concerning trends in its core food delivery operations.

Slowing Growth in Key Performance Metrics

The food-tech giant has experienced notably sluggish growth in its primary food delivery segment over the past two quarters of fiscal year 2024-25 (FY25):

• In Q2 FY25, Zomato’s gross order value (GOV) for food delivery increased by just 4% quarter-on-quarter, reaching INR 9,690 crore
• The subsequent quarter (Q3 FY25) saw even slower growth, with GOV increasing by a mere 2.3% to INR 9,913 crore

Stagnating User Engagement

Equally concerning is the plateau in Zomato’s active user base:

• Q2 FY25 showed only a 2% quarter-on-quarter increase in transacting users, reaching 20.7 million
• In Q3 FY25, the company actually experienced a decline, with transacting users dropping by 0.9% to 20.5 million

Financial Impact

These operational challenges have significantly impacted Zomato’s financial performance:

• The company’s consolidated net profit in Q3 FY25 plummeted by 57.2%, falling to INR 59 crore from INR 138 crore in the same period last year
• Despite this profit decline, operating revenue showed strong growth, surging over 64% to INR 5,405 crore from INR 3,288 crore year-over-year

The market has responded cautiously to these mixed signals, with Zomato’s shares closing 0.54% lower at INR 210.85 on the BSE on the day of the NCLT ruling.

Implications of the NCLT Verdict

The dismissal of the insolvency petition reinforces several important legal principles in the corporate insolvency landscape:

1. Procedural compliance is non-negotiable: The case underscores the critical importance of adhering to procedural requirements under the IBC, particularly the mandatory notice provision under Section 8
2. Due process prevails over substantive claims: Even with potentially valid commercial grievances, failure to follow established legal procedures can be fatal to an insolvency petition
3. Protection for ongoing businesses: The ruling demonstrates how procedural safeguards can protect operational businesses from facing unnecessary insolvency proceedings where proper legal steps have not been followed 

Element	Required Standard	Nona Lifestyle’s Application	Result
Section 8 Notice	Mandatory legal requirement before filing	Not served according to NCLT	Petition dismissed
Original Petition Status	Active prosecution required	Dismissed for non-prosecution	Restoration denied
Substantive Hearing	Depends on procedural compliance	Not reached due to procedural issues	Case not examined on merits
Financial Threshold	Unpaid debt exceeding ₹1 lakh	Alleged dues of ₹1.64 crore	Threshold met but procedure failed

For Zomato, the favorable ruling provides temporary legal relief as the company works to address its broader business challenges, particularly the concerning trends in growth rates and user engagement metrics within its core food delivery operations. While this decision settles the immediate legal dispute with Nona Lifestyle, Zomato’s management will need to focus intensely on revitalizing growth in its primary business segments to restore investor confidence and improve profitability in the coming quarters. Also Read- Stance Health Secures $1M Pre-Seed Investment To Revolutionize Musculoskeletal Care Delivery In India