Byju’s insolvency proceedings: SC agrees to early listing of US-based creditor’s plea

The Supreme Court on Friday (September 6) agreed to list for an early hearing the appeal of US-based creditor Glas Trust Company LLC against a judgment of the NCLAT, which had stayed insolvency proceedings against ed-tech firm Byju’s and approving its ₹158.9 crore dues settlement with the BCCI.

A bench comprising Chief Justice DY Chandrachud and Justices JB Pardiwala and Manoj Misra was urged by senior advocate NK Kaul, appearing for the ed-tech major, that the case needed to be heard at the earliest.

Kaul said, “The only funding was done by the promoters and today no one has brought any external borrowing. We have to show today how malafide the petition (of US firm) is.”

“I will get it listed as early as possible,” the CJI, who was indisposed and in quarantine for the last few days, said.

Senior advocate Kapil Sibal, appearing for the US-based creditor, said it also wanted an early hearing.

Bench had refused to pass interim order on Aug 22

Earlier on August 22, the bench had refused to pass an interim order to ensure that the committee of creditors (CoC) does not hold any meeting in pursuance of the insolvency proceedings against the embattled ed-tech firm.

It had listed the plea for a final hearing on August 27.

The bench had said the developments, which may take place in the meantime, can be negated if it finds there was no merit in the appeal of the US-based creditor against the judgement of appellate insolvency tribunal NCLAT.

The plea was mentioned earlier also on August 20 by Byju's and the BCCI and the top court had then also refused to pass an interim order to restrain the Insolvency Resolution Professional (IRP) from constituting a committee of creditors (CoC) in the insolvency proceedings against the ed-tech firm.

Major setback for Byju’s

In a major setback to Byju's, the top court had on August 14 stayed the verdict of NCLAT, setting aside the insolvency proceedings against the ed-tech major and approving its ₹158.9 crore dues settlement with the Indian cricket board.

The August 2 verdict of the NCLAT had come as a huge relief for Byju's as it had effectively put its founder Byju Raveendran back in control.

The top court, however, had prima facie termed the NCLAT verdict as "unconscionable" and stayed its operation while issuing notices to Byju's and others on the appeal of the ed-tech firm's US-based creditor against the judgement of the insolvency appellate tribunal.

The case stemmed from Byju's default on a ₹158.9 crore payment related to a sponsorship deal with the BCCI.

SC told BCCI to keep ₹158 crores in escrow account

The top court had directed the BCCI to keep a sum of ₹158 crore it had received from Byju's after a settlement in a separate escrow account till further orders.

"Issue notice. Pending further orders there shall be a stay of the impugned order of August 2 of NCLAT. In the meantime, BCCI shall maintain the amount of ₹158 crore, which shall be realised in pursuance of a settlement, in a separate escrow account until further orders," the bench had said.

The NCLAT had approved the ₹158.9 crore dues settlement with the BCCI and set aside the insolvency proceedings against Byju's.

Byju's had entered into a "Team Sponsor Agreement" with the BCCI in 2019. Under the agreement, the ed-tech firm got exclusive rights to display its brand on the Indian cricket team's kit and some other benefits. Byju's had to pay a sponsorship fee. The company met its obligations till the middle of 2022 but defaulted on subsequent payments of ₹158.9 crore.

After insolvency proceedings were initiated, Byju's entered into a settlement with the BCCI.

On July 16, the Bengaluru bench of the National Company Law Tribunal (NCLT) had admitted 'Think and Learn', Byju's parent company, to the insolvency resolution process on a plea filed by the BCCI over default in payment of outstanding dues of almost ₹158.9 crore.

While suspending the board of the ed-tech firm, the NCLT had appointed an interim resolution professional to run the operations of the company, suspended the company's board of directors, and brought it under moratorium by freezing its assets.

The US-based lenders suspected that the settlement amount was being diverted from the credit they had extended to Byju's.

(With agency inputs)