In a major blow to the edtech giant Byju’s, the Supreme Court has overturned a pivotal ruling by the National Company Law Appellate Tribunal (NCLAT), which had approved a ₹158 crore settlement between Byju’s (Think and Learn Pvt Ltd) and the Board of Control for Cricket in India (BCCI). This decision, made on October 23, not only nullifies the earlier NCLAT ruling but also reopens the door to insolvency proceedings against the struggling company.
The Supreme Court’s Ruling
The Supreme Court’s verdict found that the NCLAT had deviated from the established procedures laid out in the Insolvency and Bankruptcy Code (IBC). The court criticized the NCLAT for prematurely ending the Corporate Insolvency Resolution Process (CIRP) and wrongly invoking its inherent powers to sanction the settlement.
“The NCLAT erred in allowing the withdrawal of the insolvency application,” noted Chief Justice of India (CJI) DY Chandrachud. The court emphasized that any withdrawal must be processed through the Interim Resolution Professional (IRP), underscoring the need for strict adherence to legal protocols. This ruling mandates that the ₹158 crore deposited by the BCCI will now be redirected to an escrow account managed by the Committee of Creditors (CoC).
Legal Representation and Criticism
The bench, which included Justices JB Pardiwala and Manoj Misra, heard arguments from a team of senior advocates, including Shyam Divan and Kapil Sibal for Glas Trust, and Abhishek Manu Singhvi for Byju’s. The BCCI was represented by Solicitor General Tushar Mehta. The court’s decision highlighted the NCLAT’s failure to follow appropriate legal procedures, reinforcing that the NCLT is not merely a “post office” for automatic approvals.
The Ripple Effect
With this ruling, Byju’s finds itself back in the crosshairs of legal challenges, as the court indicated ongoing investigations by various authorities, including those in Delaware and India’s Enforcement Directorate. The annulment of the settlement means the insolvency proceedings will now resume, prolonging Byju’s struggles.
Byju’s Ongoing Legal Battles
Byju’s has been grappling with an array of legal challenges in various jurisdictions, from the NCLT to courts in New York. The company has been in tense negotiations with multiple lenders, including the BCCI and Glas Trust, regarding substantial loan repayments.
The troubles began in June 2023 when Byju’s defaulted on an interest payment for a $1.2 billion term loan, igniting disputes with US lenders who accused the company of defaulting. While Byju’s contended that the loan terms were unfairly manipulated, the BCCI moved to initiate insolvency proceedings over the ₹158 crore loan default.
On August 2, 2024, the NCLAT had initially approved the settlement, which halted the insolvency process and allowed Byju Raveendran, the company’s founder, to regain control. However, Glas Trust’s objection led to the current Supreme Court challenge.
Conclusion: A Long Road Ahead
The Supreme Court’s annulment of the NCLAT ruling has intensified the pressure on Byju’s as it navigates an already tumultuous landscape. With the resumption of insolvency proceedings, the company’s future remains uncertain, and it faces mounting scrutiny from creditors and regulatory bodies alike.
As Byju’s strives to stabilize its financial standing, the lessons from this ruling underscore the importance of adhering to procedural norms within the Insolvency and Bankruptcy Code. With its reputation and operational stability at stake, Byju’s will need to address these challenges head-on to regain the trust of its stakeholders.
