These companies on their part deny the charges, in several instances accusing the vendors of straying from the terms of their contracts, or citing contractual disagreements for non-payments.
Vendors, lawyers and industry observers pointed to an increase in cases of defaults or delayed payments last year as several startups struggled to raise capital.
Matters came to a boil when the Board of Control for Cricket in India in November moved the National Company Law Tribunal against Think & Learn Pvt. Ltd, the parent company of embattled ed-tech firm Byju’s, over non-payment of sponsorship dues amounting to ₹158 crore. Byju’s has since sought to settle the dispute through arbitration.
Last week, France-based Teleperfomance Business Services also filed an insolvency plea with NCLT in Bengaluru against the ed-tech firm.
As funding dwindles amid an extending funding winter, a noticeable rise in payment delays and defaults by startups is evident, said Raghav Dhoot, founder of Avyay, a startup advisory firm with more than 80 startup clients.
“While past delays were linked to issues like invoice reconciliation and internal procedural issues, the recent surge is primarily attributed to cash crunch,” said Dhoot. “Vendors face challenges like startups disputing invoice validity, questioning pending payments, seeking discounts, or, in more severe cases, becoming unresponsive.”
There is a substantial increase in such cases since the onset of the funding winter in 2022, said Salman Waris, a lawyer and owner of law firm TechLegis. “In the past, cases were filed by vendors against startups like Nestaway, Zoomcar, and Oyo Hotels, and more recently in 2023 (against) Dunzo,” he said.
Oyo, in response to a Mint query, said the company had not faced any payment-related cases over the past year, while admitting it had faced litigations over dues to vendors during the pandemic years.
Byju’s, Dunzo, Nestaway and Zoomcar did not reply to queries sent last week.
A vendor who had been catering to Dunzo for several years said the quick commerce platform had abruptly stopped payments.
“We had a very good relationship with Dunzo since 2019, but all of a sudden they have stopped making payments,” said a vendor, requesting anonymity. According to media reports, Dunzo last year received legal notices from seven vendors, including Google, on unpaid dues. Mint couldn’t establish this independently.
Two vendors to Stanza Living, which provides shared-living accommodations, said the company had delayed payments for about a year.
“I have been working for 3-4 years (with Stanza) but this is the first time it’s been delayed so much,” said one of them. “I have continued working with Stanza because I need to get my money.”
In response to queries from Mint, a spokesperson for Stanza Living said, “Our payment timeliness adherence is more than 97%, with the rest accounting for instances where payment delays could occur due a variety of factors like delay in submission of bills, incorrect invoicing, breach of scope of work, etc.—just like in any other business.”
Health-tech startup Pristyn Care, too, has delayed payments, according to a vendor Mint spoke with. The company said two vendors had raised issues involving an amount below ₹10 lakh (combined).
“In one instance, there’s a disagreement over deliverables and the actual fulfillment of the contracted terms. The second vendor’s association has been terminated due to unprofessional behaviour…,” a spokesperson said. “… a police complaint has been filed against the second vendor.”
Legal recourse for vendors
If a company hasn’t paid vendors, the vendors can serve a notice for breach of agreement and payment recovery, and follow up by filing a civil suit for non-payment, said Dhoot of startup advisory firm Avyay.
“Additionally, if registered as an MSME under the Micro, Small, And Medium Enterprises Development Act, 2006 (MSME Act), vendors can escalate payment issues to the Micro and Small Enterprises Facilitation Council through the MSME Samadhan Portal… If unsuccessful, arbitration is initiated for dispute resolution,” he said.
“The vendors also have recourse under the Insolvency and Bankruptcy Code, 2016 as operational creditors, enabling them to serve a demand notice to the startup for outstanding debt and initiate insolvency proceedings if necessary,” Dhoot added.