SC revokes Byju’s settlement with BCCI, revives insolvency proceedings
The court said that all parties and creditors could approach the Committee of Creditors (CoC) to pursue the remedies available to them under the Insolvency and Bankruptcy Code
The Supreme Court on Wednesday set aside a settlement reached between Byju’s and the Board of Control for Cricket in India (BCCI), effectively reviving insolvency proceedings against the embattled ed-tech company.
The court directed that all parties and creditors could approach the Committee of Creditors (CoC) to pursue remedies available to them under the Insolvency and Bankruptcy Code (IBC), adding that the ₹158 crore Byju’s paid to BCCI as part of the earlier settlement be transferred to an escrow account under CoC’s control, pending further review of the case.
The decision came after a bench, led by Chief Justice of India (CJI) Dhananjaya Y Chandrachud, affirmed the legal right of Byju’s US-based lender, Glas Trust, to raise objections and be involved as a stakeholder in the settlement between Byju’s and BCCI. Glas Trust had expressed concern about potential round-tripping of funds and preferential payments to BCCI over other creditors.
The top court set aside an August 2 order of NCLAT that paved the way for the Byju’s-BCCI settlement, and the halting of the bankruptcy proceedings against Byju’s, which is officially known as Think and Learn Pvt Ltd.
According to the bench, also comprising justices JB Pardiwala and Manoj Misra, NCLAT was wrong in invoking its discretionary power to let BCCI withdraw the application it previously filed to initiate bankruptcy proceedings against Byju’s. The court held that NCLAT ought not to have invoked its powers under Rule 11 of NCLAT Rules to halt the bankruptcy process upon a payment of ₹158 crore by Byju’s to BCCI. Rule 11 empowers NCLAT to make such orders or give such directions as may be necessary for meeting the ends of justice or to prevent abuse of the process of the appellate tribunal.
However, the bench underlined that when an extensive procedure for halting and withdrawal of bankruptcy proceedings is enumerated under IBC, then NCLAT must not invoke its inherent powers to bypass the laid down legal procedure.
Rejecting Byju’s objections to the locus (legal standing) of Glas Trust, which loaned Byju’s approximately $1.2 billion, the top court noted that Glas Trust was not an unrelated party to the dispute, especially since it has reasonable apprehensions regarding round-tripping of the funds that were used in paying BCCI and charges of preferable payments to the cricketing body.
During the earlier proceedings, Byju’s, represented by senior counsel Abhishek Manu Singhvi, had defended the settlement, stating that the funds used to clear the BCCI debt came from personal resources of Riju Raveendran, a shareholder, and brother of Byju Raveendran.
Solicitor general Tushar Mehta, representing BCCI, had also supported the NCLAT order, arguing that Byju’s need not settle with all the creditors to be able to settle with one – BCCI in this case. He also outlined certain conditions for a potential settlement, contending that any payment should not be sourced from Byju’s assets, a stance intended to protect creditor interests.
However, the Supreme Court has now left it to the CoC to address all claims of creditors, including BCCI, following a more comprehensive review, which includes hearing objections from Glas Trust and others.
The insolvency process against Byju’s was originally initiated in June by the National Company Law Tribunal (NCLT) in Bengaluru following a plea by BCCI alleging default by Byju’s to pay the cricketing board approximately ₹158 crore related to sponsorship deals for the Indian cricket team’s jerseys.
In July, NCLAT in Chennai halted the insolvency proceedings after being informed by BCCI that it had reached a settlement with Byju’s. Riju Raveendran agreed to clear the dues from his personal funds, generated from the sale of Think and Learn’s shares between 2015 and 2022.
On August 2, NCLAT approved the settlement, halting bankruptcy proceedings against Think and Learn, and returning control of the company to its founder, Byju’s. The tribunal approved the settlement after receiving an undertaking that the repayment would be personally funded by Riju and not from funds meant for financial creditors.
Glas Trust then approached the Supreme Court objecting to the payment settlement between BCCI and Byju’s, claiming that the ₹158 crore was “tainted” and was misappropriated from it.