SC resumes bankruptcy case against Byju’s, denounces NCLAT proceedings as ultra vires

The Supreme Court on Wednesday set aside the National Company Law Appellate Tribunal’s (NCLAT) order staying the insolvency proceedings against Byju’s. It ruled that the company must follow established protocols under the Insolvency and Bankruptcy Code (IBC) to resolve its issues $A debt of Rs 158 crore is owed to the Board of Control for Cricket in India (BCCI).

court instructions, $The settlement amount of Rs 158 crore previously agreed between Byju’s and BCCI will be deposited into an escrow account controlled by the Committee of Creditors (CoC). The order is in line with the court’s September 26 order, which directed the interim resolution expert (IRP) to maintain the status quo and not hold a CoC meeting until the judgment is delivered.

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The Supreme Court clarified that while Byju’s and BCCI can still seek settlement, it will have to be done under the supervision of the IRP and CoC as per IBC regulations.

SC condemns NCLAT for overstepping its powers

A three-judge bench headed by Chief Justice DY Chandrachud criticized the NCLAT for abusing its inherent powers under Rule 11 of the NCLAT Rules, 2016, by allowing withdrawal of the bankruptcy petition. The Supreme Court emphasized that if there are specific exit procedures, NCLAT cannot invoke its inherent powers to circumvent those procedures.

The court clarified that once the bankruptcy application is accepted, only the IRP has the right to file a withdrawal request on behalf of the debtor and not the relevant parties.

It further emphasized that after admission of the case, management of the debtor’s affairs becomes the responsibility of the IRP, which means that any settlement or withdrawal request must be in compliance with IBC Section 12A and follow IBBI (Insolvency and Bankruptcy Board) Section 30-A The process of India) rules.

The Supreme Court noted that NCLAT’s mistake was to directly approve the settlement, bypassing the National Company Law Tribunal (NCLT), which has primary jurisdiction over such withdrawals.

The court stated that this procedural lapse was a significant legal oversight, particularly where a formal withdrawal application was not submitted through the proper channels.

Glass Trust Company’s Request

The ruling comes in response to an appeal filed by US creditor Glas Trust Company LLC, which challenged the NCLAT decision. Glas Trust claimed that settlement funds provided by Riju Raveendran, brother of founder Byju Raveendran, were “tainted” and should have been distributed to the company’s financial creditors.

Glas cited the Enforcement Directorate’s ongoing investigation into Byju’s financial dealings, adding that Byju Raveendran currently lives in Dubai, while Riju lives in London.

On August 14, the Supreme Court asked Byju’s operational creditor BCCI to deposit the settlement amount $Rs 158 crore was deposited in a separate escrow account pending the outcome of Glas Trust’s appeal.

Earlier, on August 2, NCLAT allowed a settlement with BCCI and stayed the NCLT order initiating corporate insolvency proceedings against Byju for non-payment of dues. The decision was taken after Riju Raveendran, brother of company founder Byju Raveendran raised funds $158 crore to reimburse the cricket board. The move temporarily restores Byju Raveendran’s control over the company’s operations, providing a brief respite from the bankruptcy proceedings.

Byju’s signed a sponsorship deal with BCCI in 2019 to have its brand on the Indian cricket team’s jersey. The deal was extended till November 2023, BCCI seeks to cash in $140 Crore Bank Guarantee and Demand for Additional $1.6 billion in installments.

However, BCCI eventually took Byju’s to the bankruptcy court for failure to perform $The payment of Rs 158 crore prompted the NCLT to accept the bankruptcy petition on June 16.

After the NCLT verdict, Byju’s appealed to the NCLAT, which dismissed the insolvency proceedings on August 2. However, Glas Trust immediately challenged the settlement, arguing that it was detrimental to the interests of the company’s financial creditors.

Founded in 2011 by Byju Raveendran and Divya Gokulnath, Byju’s has become a leading player in the education technology space in India. However, the company’s rapid growth has been marred by financial difficulties, regulatory scrutiny and disputes with creditors.

Byju’s, once India’s most prominent startup, is facing multiple lawsuits from lenders and investors. The lender has sought repayment of a $1.2 billion loan he took out in November 2021. Investors have sought to retain their rights in the company’s parent Think & Learn, while investors including the Qatar Investment Authority have sought court rulings seeking details of Raveendran’s personal assets.

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At the peak of business in 2021, the company claims to achieve $It has revenue of Rs 10,000 crore and has over 85,000 employees, including teachers on the platform.