Supreme Court Stays NCLAT Order Closing Insolvency Process Against Byju's, Asks BCCI To Deposit Rs.158 Crores In Separate Escrow Account

The Supreme Court today (August 14) 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 bench led by CJI DY Chandrachud comprising Justices JB Pardiwala and Manoj Misra was hearing the challenge to the NCLAT's decision by a US-based lender Glas Trust Company LLC in appeal.

The Court stayed the impugned order and directed the BCCI to deposit the sum of 158 Crores in a separate escrow account till further orders. 

"Issue notice, pending further orders there shall be a stay of the impugned order of 2nd August 2024 NCLAT. In the meantime, the Board of Control for Cricket in India (BCCI) shall maintain the amount of Rs. 158 Crores which shall be realised in pursuance of a settlement, in a separate escrow account until further directions." 

Solicitor General Tushar Mehta appearing for the BCCI protested against the stay order and requested that BCCI first be given an opportunity to be heard by the bench. 

"Kindly don't stay the judgement, let it remain...for the first time I am saying this before your lordships, we are not heard. We have an answer to everything my lords" 

The CJI clarified that the Court is only asking the amount to be kept in an escrow account and not be deposited with the Court. 

The appellant was represented by Senior Advocate Shyam Divan who stated that the settlement between Byju's and BCCI was against the Statutory provisions. Divan stressed that there are enforcement proceedings pending against Byju's with a look out notice against the founder Riju Ravindran. 

Senior Advocate AM Singhvi appeared for Byju's on caveat and contested the stay granted, stating that it would virtually mean allowing the appeal of the lenders. 

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 

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