Supreme Court To Pronounce Judgment On Plea Challenging Byju's-BCCI Settlement Tomorrow

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 and reserved the judgment on September 26.

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 had raised doubts about the NCLAT's decision dated and orally observed that there was no due application of mind. The bench had 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.

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.

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