'Why Pick Up BCCI & Settle Only With Them?' Supreme Court Asks Byju's; Says NCLAT Didn't Apply Mind In Approving Settlement
Anmol Kaur Bawa
25 Sep 2024 10:27 AM GMT
The Supreme Court on Wednesday (September 25) orally expressed dissatisfaction with the order of the National Company Law Appellate Tribunal (NCLAT) which closed 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).
The Court, hearing an appeal filed by US-based lender Glas Trust Company against the Byju's-BCCI settlement for Rs 158 crores, observed that the NCLAT did appear to have properly applied its mind.
"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.
Senior Advocate Shyam Divan, appearing for Glas Trust, argued that the NCLAT erred in invoking its inherent powers under Rule 11 of NCLAT rules to allow the settlement and termination of the insolvency proceedings. Glas Trust opposed the settlement, alleging the money paid by Riju Raveendran(brother of Byju Raveendran) was tainted, and a case of “round-tripping”.
Senior Advocate Dr Abhishek Manu Singhvi, for Byju's, submitted that the insolvency petition was filed by the BCCI itself and there was nothing wrong in closing the same on the basis of the settlement. Also, Glas Trust cannot move an appeal against the settlement done with BCCI done out of the personal funds of Riju Raveendran.
However, the bench expressed doubts about the reasoning applied by the NCLAT.
"Just read para 44 of the NCLAT order, just see whether this meets the application of mind. Where is there any application of mind?" CJI asked Singhvi.
For reference, in the said paragraph, NCLAT observed : "We have perused the affidavit and undertaking and found that the money has been generated by Riju Raveendran from his own sources by sale of his shares held in the CD and income tax has been paid on such sale of such shares. In the undertaking, he has categorically stated that he is not violating the order dated 18.03.2024 passed by the Delaware Court and confirmed that he has not directly, indirectly or in any form or manner received any sum of money from disbursements made under the Credit agreement. Although, the Applicant is not satisfied about the undertaking but the Applicant has also not brought on record any evidence to the contrary that the money which is being offered has actually been brought by Riju Raveendran from the money disbursed to the borrower in terms of credit agreement or has been taken out of the coffers of the CD(Corporate Debtor)."
Senior Advocate NK Kaul, also appearing for Byju's, submitted that there was nothing wrong in approving the settlement when the CIRP has not progressed to advanced levels. He said that the Glas Trust was trying to "piggy back" on the proceedings initiated by another debtor and if they wanted to recover, then they should file their own application.
Solicitor General of India Tushar Mehta appeared for the BCCI.
"Would the NCLAT not bear in mind the debt owned by the Corporate Debtor? And if the application moved for withdrawal is minuscule, would not the NCLAT say I am not allowing this?" CJI asked the SG.
The arguments will continue 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.
Previously, the Court refused to stay the meeting of the Committee of Creditors formed by the Resolution Professional in relation to the insolvency resolution of the ed-tech firm
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
