NET 4 KEEL OVER IN BANKRUPTCY PROCEEDINGS, CUSTOMERS LEFT IN BLACKWATERS

 

BRIEF FACTS OF THE CASE

NET 4 India limited is originally an internet service provider in 1985 but it soon transformed into domain name registrar when the internet service business lessening around the world. Net 4 India limited was one of the largest domain registrar of India having room for over one lakh generic top-level domain such as .com, .net etc.
In 2011, Net 4 India limited was going through good waft of business, the profits were elevating, and company just finished its strategic acquisition and the revenues generated by company were hundreds of crore along with proportionate profits, data centre and offices in six cities.
NET 4 India had approached State Bank of India for seeking financial assistance, at request of corporate debtor; State Bank of India had sanctioned financial assistance of Rs. 194 Crore. The corporate debtor again approached State Bank of India on various occasion for seeking financial assistance and subsequently defaulted in payment of dues of State Bank of India.

The bank declared the account of corporate debtor as Nonperforming Asset (NPA) as per RBI guidelines on 29.09.2013.

Edelweiss Asset Reconstruction Company has filed application under Insolvency and Bankruptcy Code 2016 for recovery of debt from NET 4 India.

NO NOTICE TO CUSTOMERS

In all these developments, neither NCLT nor the RP made any attempt to keep the customers of Net4India informed. No notice was displayed on the website of the company and no individual notice was served on individual creditors of the company. Many of these customers have placed advance deposits with the company and are creditors.

The entire proceedings have been done in a suspicious manner as if to take over the property of the company by vested interests. A separate investigation is required to find out if there is any real estate mafia involved in the transaction.

Considering that the business of Net4India was a money spinner, it is inconceivable that it ran up a debt of Rs 194 crores without an active negligence from SBI. Hence how the debt arose in the first place and how the NCLT ignored the DRT pendency and went ahead with its order culminating in the sale of immovable property is a matter fit for CBI investigation and investigation by the vigilance department of SBI.

NET 4’S FINANCIAL TROUBLES

In 2017, Net 4 reported a quarterly loss of Rs 4.22 crore. In the following year, it was delisted from the National Stock Exchange and the Bombay Stock Exchange. The company was struggling to pay employees their wages on time as late as 2019, and that it had completely stopped paying out salaries amid the COVID-19 pandemic, with employees largely no longer showing up at work.
Net 4’s insolvency proceedings started last March, and hearings in the matter are ongoing at the National Company Law Tribunal.

According to Domain Incite, which first reported the insolvency proceedings in 2019, Net 4 had over 100,000 domain names under management as of February 2019.

A message on Net 4’s website warns customers of increased wait times on support calls, but only till August 15. It has been a month since that end date, and customers seem to be facing a company that may as well not exist rather than delays. None of the customers we spoke to reported ever getting in touch with someone who worked for Net 4 directly.
Vijayashankar Nagarajarao, a cyberlaw consultant who goes by the name Naavi, said in a blog post in July that ICANN and the Ministry of Electronics and Information Technology needed to step in to make sure customers weren’t locked out of their websites. He noted that this kind of situation, where Net 4’s customer support went silent and its systems stopped working as intended, already happened once in 2017.

ICANN AND REGISTRARS

Registrars like Net 4 are accredited by the International Corporation for Assigned Names and Numbers. Many users are reaching out to ICANN’s India head, Samiran Gupta, for help on renewing their Net 4 purchases. According to multiple emails we obtained from customers, ICANN is referring users to file individual complaints:
While ICANN coordinates systems internationally for namespaces and domain names, individual domain registries also have to license registrars. For example, the National Internet Exchange of India (NIXI) operates Registry.in, which authorises registrars to sell the .in and .bharat domain names. Last year, Net 4 was listed by NIXI as a “top-performing” registrar. As of writing, the company has been moved to the bottom of the “other performers” list.
“ICANN did not anticipate the problem of a Registrar walking away leaving the customers in the lurch,” Naavi wrote earlier this year. “Now it is the responsibility of ICANN to sort out this issue. Otherwise, there could be legal action against the representative of ICANN in India,” he warned, referring to Gupta.
While Domain Incite, which first reported Net 4’s insolvency process, reported that Net 4 has been “suspended”, we have reached out to ICANN for more information on what exactly is being done to protect users’ interests.
It is worth noting that ICANN’s master agreement with registrars entitles them to a termination of contract if a registrar has been tangled in insolvency proceedings for more than a month. But they don’t seem to have taken advantage of this clause. ICANN also says on its complaints page that it cannot intervene when complaints are made regarding country-specific domain names. We have sent a query to NIXI, which operates the .in registry, to find out if they are taking action on behalf of Net 4 customers.
Net 4’s website seems to be up, but many of its automated processes seem to be down, with no solution in sight except to wait for ICANN to respond to individual complaints. Several businesses could be affected in the meanwhile — the company claims to have thousands of businesses signed on, such as Airtel, CNBC TV18, Essar, and TCS. As more of these customers approach expiry dates for their services, the impact could grow.
The situation may remain uncertain until Net 4’s financial troubles are cleared up. A resolution plan is pending at the National Company Law Tribunal, whose principal bench said in an order that it would look at the plan only after considering a few more issues. The next hearing, in that case, is set for October 1.

NIXI PERMITS NET4INDIA DOMAIN NAME CUSTOMERS TO SHIFT TO OTHER REGISTRARS

National Internet Exchange of India (Nixi) has allowed migration of websites with ".in" extension from the servers of insolvency-bound Net4India to other registrars to avoid disruption in online activities of portal owners. Around 73,000 websites with ".in" extension were facing uncertainty following closure of Net4India, a website name and hosting service seller.

Nixi has allowed continuation of service of the impacted website till December 2020 even if they are unable to pay renewal fee for their domain name. The non-profit organisation, managed by IT ministry, facilitates exchange of domestic Internet traffic between the peering internet service providers members. "Nixi has started permitting end users of ".IN" Domain to migrate to other registrars (other than Net 4 India). Nixi has executed 64 such requests successfully," Nixi said in a statement. Net4India services are on the verge of closure as it is undergoing a liquidation process. "In recent days, Nixi was informed that Net 4 India, who is one of the registrar of NIXI for Country code domain “.IN” is closing. Nixi has decided not to discontinue the .IN Services for those .IN domain end users whose renewal is due till December 2020.

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