Byju's Insolvency| Supreme Court Declines Byju's & BCCI Plea To Stay Meeting Of Committee Of Creditors
The Supreme Court on Thursday (August 22) refused to stay the meeting of the Committee of Creditors formed by the Resolution Professional in relation to the insolvency resolution of ed-tech firm Byju's.
Although Senior Advocate Dr Abhishek Manu Singhvi (for Byjus) and Solicitor General of India Tushar Mehta (for the BCCI) made fervent and repeated submissions to stay the CoC meeting, the Court was not persuaded.
On August 14, the bench led by CJI DY Chandrachud comprising Justices JB Pardiwala and Manoj Misra had stayed the order of the National Company Law Appellate Tribunal (NCLAT) which upheld the settlement between Byjus and the Board of Control of Cricket in India (BCCI) in relation to the former's Rs 158 crore dues to the latter. The stay order was passed on an appeal filed by US-based lender Glas Trust Company LLC which opposed the Byju's-BCCI settlement.
The stay order led to the revival of the insolvency proceedings against Byju's. On August 20, the Court declined Byju's request to stay the formation of the CoC.
Today, as soon as the matter was taken, Senior Advocate Shyam Divan, representing the appellant, said that he required time to respond to the voluminous response filed by the respondents.
Singhvi then told the bench that the CoC was hastily constituted yesterday evening at the instance of Glas Trust Company to render his case infructuous. Singhvi submitted that 98% of the CoC are representatives of Glas Trust Company. He stated that no prejudice would be caused if the CoC meeting is deferred till Tuesday, the next hearing date.
SG Tushar Mehta, for the BCCI, backed Singhvi's request and said that an interim order was necessary to "balance the equities."
However, the CJI said that if the appeal is ultimately dismissed, then the CoC decisions also will be invalidated. CJI Chandrachud said that the appeal will have to be heard on merits and posted the matter next Tuesday.
SG Mehta then requested to direct the RP to not file a withdrawal application. The counsel representing the RP told the bench that he has already informed the BCCI via email that no such application will be filed while the matter is pending in the Supreme Court.
NCLAT Order
Justice Rakesh Kumar Jain, presiding over the case noted that the source of the settlement funds was transparent and that the interests of all parties, including the Glas Trust, was preserved. The Glas Trust has the option to revive the case if needed but the settlement as it stands has been officially approved.
The settlement will be funded by Riju Ravindran, the brother of Byju's founder Byju Raveendran and a major shareholder in the company. Riju Ravindran has committed to using his personal funds to cover the arrears. These funds are derived from the sale of shares in Think & Learn, the parent company of Byju's, between May 2015 and January 2022.
The approval of this settlement followed concerns raised by US-based lenders. These lenders questioned the legitimacy of the funds being used, suspecting that they might be diverted from loans provided by them. In response, the NCLAT required Byju's to submit an undertaking confirming that the funds used for the settlement were not sourced from the term loans opposed by these lenders.
Background
The insolvency proceedings against Byju's began when the National Company Law Tribunal (NCLT) in Bengaluru ordered the initiation of corporate insolvency resolution on June 16, 2024. This action followed Byju's default on a ₹158.9 crore payment related to a sponsorship deal with the BCCI. The NCLT's decision included suspending Byju's board and appointing an interim resolution professional to manage the company's financial obligations.
At the heart of Byju's financial problems was the "Team Sponsor Agreement" with the BCCI established in July 2019. This agreement granted Byju's exclusive rights to brand display on the Indian cricket team's kit advertising during cricket telecasts and access to tickets for BCCI-organized matches. In exchange, Byju's agreed to pay a sponsorship fee. Although Byju's met its payment obligations through March 2022 and settled the fees for the India-South Africa series in June 2022, it failed to pay subsequent invoices. This resulted in a shortfall of ₹158.9 crore despite a bank guarantee of ₹143 crore being encashed.
Case Details : GLAS TRUST COMPANY LLC Vs BYJU RAVEENDRAN | Diary No. - 35406/2024