BACKGROUND-
The BCCI had moved the plea to initiate Corporate Insolvency Resolution Process (“CIRP”) against the Corporate Debtor for a default on the payment of around INR 158 Crores (Indian National Rupees One Hundred and Fifty-Eight Crores) connected to Indian cricket team jersey sponsorship deals. The plea for the initiation of CIRP was admitted by the National Company Law Tribunal, Bengaluru, in June 2024. Through an order dated July 16, 2024, the NCLT admitted the petition under Section 9 of the Code and appointed Mr. Pankaj Srivastava as the Interim Resolution Professional, triggering a moratorium under Section 14 of the Code.
However, Mr. Byju Raveendran, the suspended director, promoter and shareholder of the Corporate Debtor challenged the NCLT order and contended in the NCLAT that a settlement with BCCI was in progress. The settlement claim, however, was challenged by Glas Trust Company LLC, a financial creditor representing US-based lenders. Glas Trust argued that the funds offered by the Corporate Debtor to settle the BCCI’s claim could potentially be an act of round-tripping, using money owed to US lenders. The NCLAT dismissed Glas Trust’s concerns and accepted the settlement, thereby halting the insolvency process of the Corporate Debtor.
Following the decision of the NCLAT, Glas Trust moved the Supreme Court, which stayed the NCLAT’s ruling vide an order dated August 14, 2024. The Supreme Court also ordered that the amount of INR 158 Crores paid to the BCCI shall be held in a separate escrow account pending further directives from the apex court.
INTRODUCTION-
On August 14, 2024, the Hon’ble Supreme Court of India stayed the order of the National Company Law Appellate Tribunal, Chennai, which halted the insolvency proceedings against BYJU’S, initiated by the Board of Controllers of Cricket in India. This case, involving BYJU’S parent company, Think & Learn Private Limited, raises several key issues regarding the insolvency mechanism under the Insolvency and Bankruptcy Code, 2016.
The Hon’ble NCLAT observed that they have perused the affidavit and undertaking submitted by Mr. Riju Raveendran and found that the money has been generated by Mr. Riju Raveendran from his own sources by sale of his shares held in the Corporate Debtor and that income tax has been paid on sale of such shares. Based on their observations, the NCLAT ultimately ruled in favour of the appellant, and invoked Rule 11 of the NCLAT Rules, 2016, to allow the settlement with the BCCI, before a Committee of Creditors was constituted. However, the NCLAT also stipulated that if the undertaking submitted by Mr. Riju Raveendran was breached, the NCLT order dated July 16, 2024, would automatically revive.
KEY ASPECTS-
Following the Supreme Court’s order to resume insolvency proceedings against the Corporate Debtor, the IRP appointed by the NCLT assumed office on August 14, 2024, and constituted the CoC on August 21, 2024. In surprising turn of events, the IRP has removed Glas Trust from the CoC on the grounds that it does not represent at least 51% (Fifty-One Percent) of the lenders in the consortium that extended a USD 1.2 billion (United States Dollar One Point Two Billion) term loan to Byju’s Alpha, Inc. The Corporate Debtor had disqualified most of the lenders represented by Glas Trust on the grounds of exercising their right under the credit agreement to exclude lenders deemed to be predatory or focused on distressed debt. In response, Glas Trust has filed a petition before the NCLT seeking the removal of the IRP and a stay on further CoC proceedings. However, the NCLT has deferred its decision on the matter.
The Supreme Court on September 11, 2024 decided to schedule the hearing of the appeal filed by Glas Trust against the NCLAT order, on September 17, 2024. The decision of the Apex Court to fast track the proceedings, follows a request from the counsel of the parties for an urgent hearing, citing recent developments in the case.
CONCLUSION-
The BYJU’S insolvency case highlights the intricacies of India’s insolvency regime, particularly when cross-border financial obligations are involved. The Supreme Court’s stay has revived the CIRP, and its pending decision will significantly influence the fate of BYJU’S, and its various stakeholders, including but not limited to its creditors and its customers. The outcome will depend on the resolution process, the CoC’s decisions, and further judicial scrutiny, all of which will shape the future of this high-profile ed-tech company.
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Written by- ALOK G. CHHAPARWAL
