Lender’s File Lawsuit Against Byju’s U.S. Arm Alpha for alleged Concealment of $500 Million

Lender’s File Lawsuit Against Byju’s U.S. Arm Alpha for alleged Concealment of $500 Million

Byju’s lenders have accused the ed-tech start-up of concealing $500 million (approximately Rs 4,134 crores) in a US firm Alpha, one of its subsidiaries. The company has been sued at the Delaware Court in the US for the recovery of a $1.2 billion loan.

The company Alpha Inc is being sued by a representative acting on behalf of lenders who are owed the aforementioned $1.2 billion. The lawsuit has been filed against Byju's Alpha, Tangible Play, Inc., and Riju Ravindran, who serves as the director of Alpha Inc.

The case is known as Glas Trust Company vs. Riju Ravindran, 2023-0488, Delaware Chancery Court (Wilmington).

The litigants have alleged that Alpha Inc hid $500 million as part of a fight between creditors and the company. The lenders argue that due to a previous default, they possess the authority to appoint their representative, Timothy R. Pohl, as the company’s leader. Lenders claim that because of a default earlier this year, they have the right to put their representative on the board of Alpha Inc.

On the other hand, Byju’s has rebutted the claim that it is hiding $500 million through its US-based company. Terming Byju's Alpha as a non-operative US entity with no employees.

In a statement about the matter, the company said, “This is an interim order of a Delaware Court to maintain status quo in relation to BYJU’S Alpha, a non-operative US entity set up to receive the Term Loan B, with no employees.”

According to the company, the litigants have made bewildering claims that BYJU'S ‘moved’ $500 million from BYJU'S Alpha, insinuating that these acts were somehow wrongful. The company stated this to be entirely incorrect and categorically denied these allegations.

Prior to this, the company had been working to address the concerns of creditors seeking to restructure a $1.2 billion (roughly Rs. 99,274 crores) term loan, while also preparing for an anticipated IPO of its tutoring unit Aakash.

The ongoing legal proceedings revealed that a senior manager at Byju’s Alpha admitted that he had transferred $500 million out of the company’s account. However, Byju’s Alpha’s lawyers contended that this action was taken to safeguard the funds from predatory lenders, asserting that it was within their rights as per the loan agreement.

Byju’s Alpha claimed that it was in the process of meeting all its debt obligations, considering any defaults as technical breaches of the loan agreement.

The Delaware Chancery Court presided over by Judge Morgan Zurn, has refrained from passing any ruling on the appropriateness of the fund transfer but did order Byju's Alpha managers not to make any significant changes to the company. Later this year a Trial has been scheduled to determine control over Byju's Alpha.

The lawsuit was filed by Glas Trust Company against Byju's Alpha, its director Riju Ravindran, and Tangible Play. Both the companies being sued are subsidiaries of Think and Learn Private. Riju Ravindran also serves as a director of Think and Learn.

Byju’s Alpha is regarded as a holding company that lenders seek to control to safeguard their rights, according to statements made during the hearing. The lenders clarified that their aim is not to take over the entire ed-tech company, but rather to protect their interests.

Byju’s Alpha contended before the Court that the lenders, who are distressed debt investors, were unjustly seeking to profit from the company’s debt. They also submitted that a substantial capital infusion is expected in the next two weeks, enabling them to repay the $1.2 billion (roughly Rs. 99,274 crores) owed to the creditors. Byju’s Alpha’s lawyers accused the lenders of deliberately attempting to harm the business without any intention to run the company.