Dunzo's last chapter: what happens when an Indian startup cannot pay

In January 2022 Reliance Retail led a $240 million round in Dunzo, paying $200 million for 25.8 percent at a valuation TechCrunch reported as $775 million. On 6 August 2025 the Bengaluru bench of the National Company Law Tribunal admitted Dunzo into insolvency. The applicant named in the Insolvency and Bankruptcy Board of India's record is Velvin Packaging, a packaging supplier owed a principal of about ₹1.91 crore.

As of October 2026 the process is still running. By 5 September 2026 creditors had filed 84 claims for ₹634.30 crore, of which ₹198.06 crore had been admitted.

What happened to Dunzo?

Dunzo, a delivery startup backed by Google and Reliance Retail, ran short of cash through 2023 and 2024, went offline in January 2025 and was admitted into insolvency on 6 August 2025.

Dunzo Digital Pvt Ltd was incorporated in Karnataka in 2014; its co-founders are Kabeer Biswas, Ankur Aggarwal, Dalvir Suri and Mukund Jha. When Google invested $12 million, Business Today reported on 6 December 2017: "For the first time, Google has made a direct investment in an Indian startup". Dunzo Daily, launched in August 2021, promised essentials "in 19 minutes", and the Reliance round lifted the valuation from $300 million to $775 million. Speaking for Reliance, Isha Ambani said: "Dunzo is the pioneer of Quick commerce in India". Reported totals for the money Dunzo raised run from $449 million to $485 million.

Entrackr reported FY23 operating revenue of ₹226 crore, up from ₹54 crore, and a loss of ₹1,801 crore, up from ₹464 crore: ₹9.09 spent for every rupee earned. Inc42 put the year at ₹206.5 crore of revenue and a ₹1,748 crore loss, and reported in May 2025 that the FY24 accounts had not been filed.

Reuters reported on 19 July 2023 that Dunzo had capped pay at ₹75,000 a month, cut about 30 percent of its staff in April and shut half its dark stores, and, citing Moneycontrol, that June salaries had been deferred for about 500 employees. That month, Inc42 reported, seven firms including Google India and Facebook India sent legal notices over about ₹11.4 crore. By early October, according to Inc42, the deferred pay had been pushed to January and February 2024 with 12 percent interest promised; Suri and Jha were leaving, and the Reliance and Lightrock board members had resigned. In December, with November's salaries unpaid, Dunzo told staff to "plan for a worst-case timeline of Dec 15, 2023".

Inc42 put the remaining staff at about 50 at the end of August 2024, after 150 more layoffs; Insolvency Tracker gave a conflicting count of about 158 for January 2025. The app and website went offline in January 2025 after Biswas joined Flipkart Minutes as a vice president, according to Business Today, and Inc42 reported on 27 October 2025 that he was leaving Flipkart. Reliance Industries' FY25 annual report values Reliance's 78,923 Dunzo shares at nil, against ₹1,645 crore a year earlier, a sum Entrackr put at about $200 million. Two Inc42 reports put the write-off at $240 million, the size of the whole January 2022 round.

Whose petition put Dunzo into insolvency?

The IBBI's record names Velvin Packaging, a packaging supplier, as the operational creditor whose petition under Section 9 of the Insolvency and Bankruptcy Code 2016 was admitted on 6 August 2025, for a principal of about ₹1.91 crore, or ₹2.29 crore with interest. Inc42 reported the admitted petition as one filed by another operational creditor, Exotel Techcom.

Velvin's petition, CP (IB) No. 36/BB/2024, listed 107 invoices worth ₹6.81 crore in all, raised from July 2022 to April 2023, and Velvin had served a demand notice in September 2023. In June 2024 the two sides settled for ₹1.5 crore, of which ₹35 lakh was paid. The bench of Sunil Kumar Aggarwal and Radhakrishna Sreepada applied the Supreme Court's test in Mobilox v Kirusa (2017), under which a pre-existing dispute must not be "a patently feeble legal argument". According to Insolvency Tracker, it called Dunzo's defences "vague" and "an afterthought" and said Dunzo's own settlement "falsifies the initial stand of the respondent".

Exotel's later Section 9 petition was disposed of with liberty to claim before the interim resolution professional, Insolvency Tracker reported. A petitioner reported as the Invoice Discounters of Dunzo Digital had filed under Section 7, the route for financial creditors, in January 2024 for an undisclosed amount, and the tribunal dismissed that petition as "not maintainable" on 27 May 2025.

Of the 4,162 insolvency processes started by operational creditors up to 30 June 2026, 1,823, about 44 percent by our arithmetic, were settled or withdrawn. A demand notice under Section 8 gives the company 10 days to show a pre-existing dispute, and we regularly see founders let those days pass.

Where does Dunzo's insolvency stand in October 2026?

As of October 2026 Dunzo is still in its corporate insolvency resolution process, run by the resolution professional Neha Jain Nemani, who issued a fresh Form G on 17 September 2026 inviting would-be bidders to express interest by 3 October. The IBBI's record, last updated on 8 October 2026, lists only the admission order, with no extension, resolution plan or liquidation order.

Srinivas Vaidyanath Subramaniam was interim resolution professional when the process began on 6 August 2025, and the public announcement on the IBBI's record is dated 23 September 2025. The first Form G, of 6 June 2026, had an addendum on 23 June. Day 330, the Code's outer limit, fell around 2 July 2026 by our arithmetic; the Supreme Court's Essar Steel judgment of 15 November 2019 struck down the word "mandatorily" in that limit. The latest list of creditors is dated 5 September 2026.

The classes shown leave out a small residual category. By our arithmetic the 13 financial creditors on the committee of creditors hold ₹93.21 crore of admitted claims, with Minions Ventures at about 42 percent of the vote and Orbis Trusteeship at about 28 percent. TDS accounts for ₹83.23 crore of the government's claims, of which ₹35.46 crore was admitted. A fruit-and-vegetable shop's claims of ₹6,473 and ₹2.47 lakh were not admitted for want of documents.

How can a startup in India be closed?

A solvent company can close by voluntary liquidation under Section 59 of the Insolvency and Bankruptcy Code 2016 or, if it has cleared its liabilities and has no business, by applying to be struck off under Section 248(2) of the Companies Act 2013. A company that cannot pay its debts enters the corporate insolvency resolution process only when a creditor, or the company itself, applies over a default of at least ₹1 crore and the tribunal admits the application. The process ends in a resolution plan or a liquidation.

Section 59(3) requires the directors' declaration of solvency, a special resolution within four weeks and, where there are creditors, approval within seven days by two-thirds of them by value. Under the IBBI's regulations as amended on 5 April 2022, the liquidator should finish within 270 days where creditors have claims and 90 days otherwise, and distribute proceeds within 30 days, down from six months.

Strike-off is filed on Form STK-2 with a fee of ₹10,000 and processed by the Centre for Processing Accelerated Corporate Exit (C-PACE), which the Ministry of Corporate Affairs set up by notification S.O. 1269(E) of 17 March 2023. A PIB release of December 2024 said C-PACE had struck off 13,560 companies in FY24 and was taking 70 to 90 days per application. A Rajya Sabha answer of 21 July 2026, as compiled by IncorpX, puts total strike-offs at 16,464 in FY24, 15,837 in FY25 and 30,832 in FY26. Our case study on the 2017 strike-offs covers the other way a company leaves the register under Section 248.

How does the company insolvency process work in India?

A financial creditor, an operational creditor or the company itself applies to the NCLT once there is a default of at least ₹1 crore. On admission a moratorium under Section 14 halts suits and enforcement, and an interim resolution professional takes over the management under Section 17. The committee of financial creditors then has up to 330 days, including time lost to litigation, to approve a resolution plan, a limit the Supreme Court has held may be extended in exceptional cases.

The ₹1 crore threshold in Section 4 has applied since a Ministry of Corporate Affairs notification of 24 March 2020. Section 12 gives the process 180 days, one extension of up to 90 days on a 66 percent vote of the committee, and the 330-day outer limit.

Section 21 limits the committee to financial creditors not related to the company, and Section 29A bars wilful defaulters, long-standing NPA borrowers, disqualified directors and their connected persons from bidding. Liquidation follows under Section 33 if no plan arrives, if the committee votes for it by 66 percent, or if an approved plan is breached.

In a liquidation, Section 53 pays in this order: process costs; workmen's dues for 24 months, ranking equally with secured creditors who give up their security; and other employees' dues for 12 months. Next come unsecured financial creditors; government dues for two years together with any shortfall of secured creditors; other debts; preference shareholders; and equity.

Of the 9,166 cases admitted to 30 June 2026, the IBBI records 1,484 resolution plans, 3,074 liquidation orders, 1,333 withdrawals and 1,410 closures on appeal or settlement, with 1,865 still running. Plans returned 30.52 percent of admitted claims. Liquidations returned 86.73 percent of liquidation value, which by our calculation is about 3.9 percent of claims, and an unsecured creditor of a loss-making startup should weigh that gap before turning down a settlement.

What changed in India's insolvency law in 2026?

The Insolvency and Bankruptcy Code (Amendment) Act 2026, Act 6 of 2026, received assent on 6 April 2026, and notification S.O. 2625(E) of 22 May brought most of it into force on 26 May 2026. In Section 7 the word "may" becomes "shall", so the tribunal must admit a financial creditor's petition that meets the section's conditions.

The committee of creditors supervises liquidation under Section 21 and can replace the liquidator by a 66 percent vote under Section 34A. Section 54 expects a liquidation to finish within 180 days, extendable by 90, and a voluntary liquidation can now be withdrawn. Government dues get no secured-creditor priority, and Section 3(31) excludes security arising only by operation of law, such as a charge created by a tax statute, which matters for a debtor like Dunzo with ₹375.14 crore of government claims. The look-back periods within which past transactions can be challenged now run from the filing of the application, and a new Section 47 lets creditors bring those challenges themselves.

The Act also inserts a creditor-initiated insolvency resolution process in Chapter IV-A, Sections 58A to 58K, in which financial creditors of a notified class holding 51 percent can start a 150-day process, extendable by 45, while the existing management keeps running the company. Reports differ on whether that chapter is in force: LiveLaw and Taxmann say it is, but the text of S.O. 2625(E) published by IBC Laws omits section 40 of the amending Act, the clause that inserts it. Either way, it needs notified classes of eligible creditors and final IBBI regulations, and neither was in place in August 2026, the latest date we could confirm. As of October 2026 we have found no rules notified for group insolvency under Section 59A or cross-border insolvency under Section 240C.

What happens to employees when a company goes insolvent?

Unpaid salaries become claims filed with the resolution professional. In a liquidation, workmen's dues for 24 months and other employees' dues for 12 months rank second and third in the Insolvency and Bankruptcy Code's order of payment. Provident fund, pension and gratuity fund money stays outside the estate under Section 36(4)(b)(iii).

Section 17(2) of the Code on Wages, in force since 21 November 2025, requires final wages within two working days of an employee's exit or the establishment's closure. Section 45 allows claims within three years, with compensation of up to ten times the amount due. Under the Code on Social Security 2020, gratuity is payable after five years of service, or one year for fixed-term employees (Section 53), and provident fund dues are a charge on the employer's assets (Section 19).

Dunzo's list of 5 September 2026 shows 26 employee claims for ₹2.64 crore, of which ₹2.29 crore was admitted, and none from workmen. The Employees' Provident Fund Organisation's claim of ₹33.75 lakh was still under verification on that date.

What should directors do when the money runs out?

Directors should check early whether the company can pay its debts, record the answer in the board minutes and act on it before a creditor forces the question. Section 66(2) of the Insolvency and Bankruptcy Code 2016 exposes a director who "knew or ought to have known" that an insolvency process could not be avoided, and did not exercise due diligence, to a claim for wrongful trading.

Section 66(1) covers fraudulent trading. Preferences under Section 43 and undervalued transactions under Section 45 can be challenged with a look-back of one year, or two years for related parties, and Sections 49 and 50 reach transactions defrauding creditors and extortionate credit. Section 14A of the EPF Act, now Section 135 of the Code on Social Security 2020, deems everyone in charge of the business guilty of the company's provident fund offence unless they prove it happened without their knowledge or despite all due diligence. Section 133 of the Code penalises the non-deposit of contributions deducted from employees' pay.

Once the board has its answer, a company that owes nothing and has stopped business for two financial years can apply for strike-off; one that can pay everyone but has assets or creditors to deal with should use voluntary liquidation. A company that cannot pay should answer every demand notice within the 10 days the Code allows, with documents if the dispute is real, and honour any settlement it signs, since the tribunal used Dunzo's settlement with Velvin against it. It should keep provident fund deposits current and pay no related party or favoured creditor ahead of the rest. If insolvency looks unavoidable and the default is at least ₹1 crore, the company can file under Section 10 itself, at a time it chooses, once its shareholders pass a special resolution.

Frequently asked questions

Is Dunzo shut down?

Dunzo's app and website went offline in January 2025, and the company entered a corporate insolvency resolution process on 6 August 2025. As of October 2026 the IBBI's record shows no resolution plan or liquidation order.

How does an operational creditor file an insolvency petition in India?

The creditor first delivers a demand notice under Section 8 of the Insolvency and Bankruptcy Code 2016, and the company has 10 days to point to a pre-existing dispute. If it cannot, the creditor can petition the NCLT under Section 9, provided the default is at least ₹1 crore.

How long does the company insolvency process take in India?

The Code allows 180 days, one extension of up to 90 days and an outer limit of 330 days including litigation. The IBBI's averages to 30 June 2026 are 633 days for processes ending in a resolution plan and 540 days for those ending in a liquidation order, and closing a liquidation has taken a further 704 days.

What is the difference between voluntary liquidation and strike-off?

Voluntary liquidation under Section 59 of the Insolvency and Bankruptcy Code 2016 is for a solvent company with assets or creditors to deal with, and has taken 391 days on average. Strike-off under Section 248(2) of the Companies Act 2013 is for a company that has cleared its liabilities and has done no business for two financial years, or did not start business within a year. It costs ₹10,000 on Form STK-2 and took 70 to 90 days by the government's December 2024 figure.

Is provident fund money safe if a company goes into liquidation?

Money already in provident fund, pension fund and gratuity fund accounts stays outside the liquidation estate under Section 36(4)(b)(iii) of the Insolvency and Bankruptcy Code 2016, so creditors do not share it. Provident fund dues are also a charge on the employer's assets under Section 19 of the Code on Social Security 2020.

Can directors be personally liable when a company becomes insolvent?

Yes, in defined cases. Section 66 of the Insolvency and Bankruptcy Code 2016 covers fraudulent trading, and wrongful trading by a director who knew or ought to have known that an insolvency process could not be avoided and did not exercise due diligence. Section 14A of the EPF Act, now Section 135 of the Code on Social Security 2020, makes the people in charge of the business answerable for provident fund offences. Section 248(7) of the Companies Act 2013 keeps officers liable after a strike-off.

Sources

NCLT Bengaluru order of 6 August 2025 on Velvin Packaging's petition against Dunzo Digital (CP (IB) No. 36/BB/2024), as reported by LiveLaw and Insolvency Tracker; IBBI records for Dunzo Digital to 8 October 2026, including the public announcement of 23 September 2025, Forms G of 6 June and 17 September 2026 and the list of creditors of 5 September 2026; IBBI outcome data to 30 June 2026; Insolvency and Bankruptcy Code 2016, its Amendment Act 2026 and notification S.O. 2625(E) of 22 May 2026; MCA notification of 24 March 2020; IBBI voluntary liquidation regulations as amended on 5 April 2022; Companies Act 2013; notification S.O. 1269(E) of 17 March 2023 and the PIB release of December 2024; Rajya Sabha unstarred question 223 of 21 July 2026, via IncorpX; the Code on Wages and the Code on Social Security (S.O. 5319(E) to S.O. 5322(E), 21 November 2025); the EPF Act; Mobilox v Kirusa (Supreme Court, 2017) and Committee of Creditors of Essar Steel v Satish Kumar Gupta (Supreme Court, 15 November 2019); notes from Cyril Amarchand Mangaldas, Khaitan and Co, Maheshwari and Co, EY, CorpLawUpdates, IBC Laws and Taxmann; Reliance Industries' FY25 annual report, via Inc42; Business Today (6 December 2017 and 15 January 2025); TechCrunch (6 January 2022) and KrASIA; Reuters (19 July 2023); Inc42 (2023 to 2025); Entrackr (2023 and 2025) and Bar and Bench (May 2025).