Supreme Court Questions NCLAT Judgment Accepting Byju’s Rs.158.9 Crore Settlement With BCCI

Supreme Court Questions NCLAT Judgment Accepting Byju’s Rs.158.9 Crore Settlement With BCCI

The bench stayed the operation on appeal of the US-based creditor Glas Trust Company

The Supreme Court has questioned the recent judgment of the National Company Law Appellate Tribunal (NCLAT) setting aside the proceedings against ed-tech major Byju's and approving its Rs.158.9 crore dues settlement with the Board of Control for Cricket in India (BCCI).

The bench comprising Chief Justice DY Chandrachud, Justice JB Pardiwala and Justice Manoj Misra observed that the tribunal closed the proceedings under the Insolvency and Bankruptcy Code (IBC) without applying its mind and hinted at sending back the dispute for fresh adjudication.

The verdict was a huge relief for Byju's, putting its founder Byju Raveendran back in control. However, the relief was short-lived.

The apex court termed the tribunal’s verdict ‘unconscionable’, staying its operation while issuing notices to Byju's and others on the appeal of the ed-tech firm's US-based creditor Glas Trust Company.

The company is in debt of Rs.15,000 crore.

The CJI questioned, “When the quantum of the debt is so large, can one creditor walk away saying one promoter is ready to pay. Why pick up BCCI and settle with them only from your personal assets.”

Representing the US firm, senior advocate Shyam Divan assailed the tribunal’s verdict, stating it should not have stopped the insolvency proceedings against Byju's following the settlement of the amount claimed by the BCCI. He stressed that it was a case of ‘round-tripping’, as the BCCI was paid by Riju Raveendran, brother of Byju Raveendran, and the money was ‘tainted.’

On the other hand, appearing for Byju’s, senior advocates Abhishek Singhvi and N K Kaul said the money was paid by Riju from his personal assets. It was adverted by Glas Trust during the proceedings at the Delaware Court. They maintained there was nothing wrong with the tribunal's order.

Recently, the US firm told the court of being wrongly removed from the committee of creditors (CoC) by the interim resolution professional (IRP) Pankaj Srivastava dealing with insolvency against Byju's.

Explaining the facts, Sibal said, "I am the guarantor, which has the stakes of Rs.12,000 crore in Byju's. My stake is 99.41 percent and this has been reduced to zero by the IRP.”

He added that those having stakes of 0.59 percent now have 100 percent and he did not want the IRP to proceed.

Meanwhile, Glas Trust stated that based on the pleas pending in the top court, the NCLAT refused to pass any order on its fresh petition against the IRP.

Sibal sought a stay on the proceedings at the CoC.

The case:

In 2019, Byju's entered a ‘Team Sponsor Agreement’ with the BCCI. Under it, the ed-tech firm had exclusive rights to display its brand on the Indian cricket team's kit and other benefits.

Byju's had to pay a sponsorship fees and the company met its obligations till mid-2022 but defaulted on subsequent payments of Rs.158.9 crore.

After insolvency proceedings were initiated, Byju's entered a settlement with the BCCI.

In July, the Bengaluru bench of the National Company Law Tribunal (NCLT) admitted Byju's parent company Think and Learn to insolvency, on BCCI’s plea over payment default.

While suspending the board of the ed-tech firm, the NCLT appointed an IRP to run the company’s operations, suspended the board of directors, and brought it under moratorium by freezing its assets.

The US-based lenders suspected the settlement amount was diverted from the credit they had extended to Byju's.

While senior advocates Abhishek Singhvi and N K Kaul appeared for Byju's, Kapil Sibal and Shyam Divan represented the US firm. Solicitor General Tushar Mehta appeared for the BCCI.