Edtech major Byju’s has once again run into another major setback. India’s Supreme Court has now decided to overturn a prior ruling by the National Company Law Appellate Tribunal’s (NCLAT), one that gave the green light to a settlement agreement between Byju’s and the Board of Control for Cricket in India (BCCI), as well as closed insolvency proceedings against Byju’s.
The legal tussle between the edtech firm (once a giant in the Indian edtech landscape) and the BCCI began when it first filed a petition with the National Company Law Tribunal (NCLT). In the petition, it alleged that Byju’s had defaulted on payments related to a sponsorship agreement. In response, NCLT went on to initiate the Corporate Insolvency Resolution Process (CIRP), which was later suspended when the NCLAT approved a settlement between Byju’s and BCCI. This provide some much-needed relief to Byju’s at that time, and came even as financial creditor GLAS Trust Company LLC (the trustee for the lenders who are owed $1.2 billion by Byju’s) raised objections and questioned the legitimacy of the settlement.
Now, the Supreme Court has heard the appeal filed by GLAS Trust Company LLC, and has challenged the NCLAT’s approval of the settlement. The NCLAT was slammed by a bench comprising Justices JB Pardiwala and Manoj Misra (and led by CJI DY Chandrachud), which went on to point out that the NCLAT had overstepped its jurisdiction by approving the settlement without even adhering to the required legal processes.
“The NCLAT cannot be considered a post office that merely puts a stamp on the withdrawal application submitted by the parties to the corporate insolvency resolution process (CIRP)…there was no formal application made for withdrawal, the first respondent who was a former director of corp debtor, had moved NCLAT directly” the bench said. “As noted above, inherent powers cannot be used to subvert legal provisions, which exhaustively provide for a procedure to permit the NCLAT to circumvent this detailed procedure by invoking its inherent powers,” the bench went on to add. “We allow the present appeal and set aside the impugned judgement of the NCLAT dated to August 2024,” CJI Chandrachud commented on the matter.
For now, the reinstation of the CIRP means that Byju’s will, once again, be subject to increased scrutiny regarding its ability to meet obligations to creditors. Under the terms of the settlement, the edtech firm agreed to pay ₹158 crore to the BCCI to clear the outstanding dues. The BCCI has now being directed (under the ruling of the Supreme Court) to deposit the settlement amount, along with any accrued interest, into an escrow account managed by the Committee of Creditors (CoC). This will ensure that the funds will remain safe and secure until a definitive outcomes has been reached.
