Supreme Court Reserves Judgment On Plea Challenging Byju's-BCCI Settlement; Orders Status Quo & No CoC Meet Till Verdict
The Supreme Court on Thursday (September 26) reserved judgment on the petitions filed by US-based lender Glas Trust Company LLC challenging the decision of the National Company Law Appellate Tribunal (NCLAT) to close the insolvency proceedings against ed-tech company Byju's (Think and Learn Pvt Ltd) accepting a settlement between it and the Board of Control for Cricket in India (BCCI) for...
The Supreme Court on Thursday (September 26) reserved judgment on the petitions filed by US-based lender Glas Trust Company LLC challenging the decision of the National Company Law Appellate Tribunal (NCLAT) to close the insolvency proceedings against ed-tech company Byju's (Think and Learn Pvt Ltd) accepting a settlement between it and the Board of Control for Cricket in India (BCCI) for about Rs 158 crores.
While reserving the judgment, the Court directed the Resolution Profession to maintain the status quo and not to hold any meeting of the Committee of Creditors (CoC) till the verdict is delivered.
During the hearing, the bench comprising Chief Justice of India DY Chandrachud, Justice JB Pardiwala and Manoj Misra raised doubts about the NCLAT's decision dated August 2 and orally observed that there was no due application of mind. Yesterday, the bench asked why Byju's chose to settle the Rs 150 crores debt alone with the BCCI when it had over 15,000 crore debt and asked how the NCLAT could approve such a settlement. During the hearings, the Court also expressed the inclination to remit the matter back to the NCLAT for reconsideration.
Today, Solicitor General of India Tushar Mehta, for the Board of Control for Cricket in India (BCCI), submitted that he was not concerned about any adverse order in the present case, as the amount of Rs 158 crores may not be a big sum for the corpus of the BCCI, and said that he was more concerned about the "adverse consequences" which the Court's order may have on the scope of settlements in insolvency matters.
SG said that the BCCI agreed to the settlement with Byju's on two conditions - (1) the money should be untainted, coming through banking channels after tax paid, (2) the money should not be from the assets of the corporate debtor.
He submitted that prior to the insertion of Section 12A in the Insolvency and Bankruptcy Code in 2018 (S.12A allows for the withdrawal of insolvency petitions), the Supreme Court used to allow settlements by invoking its special powers under Article 142 of the Constitution. So settlement was treated by the Courts on a higher pedestal.
The SG highlighted that when the NCLAT allowed the settlement on August 2, the Committee of Creditors was not constituted. He stated that it was held in the Swiss Ribbons case that there was no bar in allowing the withdrawal of application before the CoC is credited. Reference was made to the judgment in Abhishek Singh v Huhtamaki Ppl Ltd. & Anr.
Can Regulation 30A be ignored? CJI asks
At this point, Chief Justice of India DY Chandrachud asked if the settlement could be allowed by invoking the inherent powers as per Rule 11 of NCLT rules ignoring the specific procedure mentioned in Regulation 30A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2018. CJI pointed out that as per Regulation 30A, withdrawal should be moved before the Adjudicating Authority by the applicant through IRP before the constitution of the CoC.
"Can we say that notwithstanding the drill in Regulation 30A, the residuary power under Rule 11 can be invoked? I am not sure whether after the substitution of Regulation 30A, we can take recourse to Rule 11. You can entertain an application for withdrawal even before the CoC is constituted but follow the drill of 30A" CJI observed.
SG argued that Regulation 30A need to be seen only as a directory provision and not mandatory. Even if the application wrongly mentioned Rule 11, if the decision is otherwise legal, then the invocation of the wrong provision should not be held against the parties, the SG
Senior Advocate Dr Abhishek Manu Singhvi, for Byju's, submitted that there are Supreme Court judgments which have approved settlements and cited the decisions in Abhishek Singh (supra) and Ashok G. Rajani vs Beacon Trusteeship Ltd etc. Singhvi argued that the role of IRP is merely administrative and only to forward the application and hence the failure to file the application through the IRP is not a substantial fault.
Senior Advocate Gopal Sankaranarayanan, appearing for an intervenor opposing the Byju's-BCCI settlement, submitted that the insolvency process is a proceeding in rem and hence, there cannot be an inter-se settlement between two parties. He mentioned that the ED has initiated proceedings against Byju Raveendran for siphoning off funds and look out circular is in force against him. Section 66 of the IBC, related to fraudulent deals, becomes relevant here, he submitted.
Senior Advocate Shyam Divan, for Glas Trust, in rejoinder submissions, stated that there was no written application at all to approve the settlement. He referred to M/S. Ebix Singapore Pte. Limited vs Mahendra Singh Khandelwal, Indus Biotech Private Limited vs. Kotak India Venture (Offshore) Fund
Divan said that the last audited statement of Think and Learn Pvt Ltd was dated 31/03/2022, which shows a loss of Rs 8104. 68 crores. He also informed the bench about the resignation of the statutory auditor of Think & Learn Pvt Ltd in September's first week. In the light of the reasons cited by the auditor, a public body like the BCCI should be wary of accepting the settlement money, Divan said.
Senior Advocate Kapil Sibal also made rejoinder submissions on behalf of Glas Trust and took objection to the Interim Resolution Professional removing Glas Trust from the CoC.
Yesterday, the Court expressed displeasure at the closure of the insolvency proceedings against ed-tech firm Byju's (Think and Learn Private Ltd) by accepting a settlement between it and the Board of Control for Cricket in India (BCCI) without considering the debt of other creditors.
"When the quantum of the debt is so large can one creditor walk away saying one promoter is ready to pay me? Why pick up BCCI and only settle with them? Out of your personal assets? You have today debt of 15000 crores," Chief Justice of India DY Chandrachud asked Byju's lawyers.
"We will send it back to NCLAT, let them consider afresh, let them apply their mind, where is the money coming from?" CJI observed.
On August 14 the Court stayed the NCLAT order which closed the insolvency proceedings initiated by the Board of Controllers of Cricket in India (BCCI) against ed-tech firm BYJU's over the dues of Rs. 158 Crores based on a settlement between the parties. The Court also directed the BCCI to deposit the sum of 158 Crores in a separate escrow account till further orders.
On August 20, the Top Court refused to pass orders to restrain the Resolution Professional from forming a Committee of Creditors for ed-tech company Byju's in the insolvency proceedings against it.
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 on BCCI's application. 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.
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.
Case Details : GLAS TRUST COMPANY LLC Vs BYJU RAVEENDRAN | Diary No. - 35406/2024