The Supreme Court has set aside the National Company Law Appellate Tribunal’s (NCLAT) decision halting insolvency proceedings against Byju’s, the troubled ed-tech company. A bench led by Chief Justice D Y Chandrachud also annulled the NCLAT’s approval of Byju’s Rs 158.9 crore settlement agreement with the Board of Control for Cricket in India (BCCI).
The Court determined that the NCLAT had failed to follow the correct procedures set forth in the Insolvency and Bankruptcy Code (IBC), leading to improper settlement approval between the two parties. Consequently, the Rs 158 crore deposited by BCCI in an escrow account per a previous court directive will now be moved to an escrow account overseen by the Committee of Creditors (CoC).
The apex court bench issued the ruling in response to an appeal filed by US company Glas Trust Company LLC challenging the NCLAT decision.
The bench noted that the NCLAT did not carefully consider the closure of the insolvency proceedings against the ed-tech company and ordered a fresh review of the case.
On August 2, the NCLAT granted relief to the struggling ed-tech company by overturning the insolvency proceedings against it and approving its Rs 158.9 crore settlement of dues with the BCCI.
Byju’s legal troubles
Byju’s encountered legal challenges in both Indian and US courts beginning in June 2023. During this time, Byju’s failed to make an interest payment on a $1.2 billion term loan, resulting in a dispute with its US-based lenders, primarily Glas Trust. The lenders claimed that Byju’s had defaulted on the loan and insisted on immediate repayment, while Byju’s contended that the loan agreement was being unjustly altered.
After some time, Indian cricket board BCCI initiated insolvency proceedings against Byju’s for defaulting on a Rs 158 crore loan, leading to the appointment of an interim resolution professional to handle the company’s finances during the corporate insolvency resolution process. Despite the NCLAT’s approval of the settlement between Byju’s and BCCI, US lender Glas Trust objected to the agreement. Subsequently, Glas Trust sought relief from the Supreme Court by challenging the NCLAT order.
In its first order, the top court had prima facie termed the NCLAT verdict as “unconscionable” and stayed its operation while issuing notices to Byju’s and others on the appeal of the ed-tech firm’s US-based creditor against the judgment of the insolvency appellate tribunal.
On July 16, the Bengaluru bench of the National Company Law Tribunal (NCLT) had admitted ‘Think and Learn’, Byju’s parent company, to the insolvency resolution process on a plea filed by the BCCI over default in payment of outstanding dues of almost Rs 158.9 crore.
In 2019, Byju’s signed a “Team Sponsor Agreement” with the BCCI, granting them exclusive rights to display their brand on the Indian cricket team’s kit and other benefits.
Byju’s fulfilled their obligations until mid-2022 but failed to make subsequent payments of Rs 158.9 crore, leading to insolvency proceedings.
After negotiations, Byju’s reached a settlement with the BCCI. The Bengaluru bench of the National Company Law Tribunal (NCLT) admitted Byju’s parent company, ‘Think and Learn’, to the insolvency resolution process on July 16 due to default in payment of outstanding dues.
