The ongoing insolvency saga of Byju’s, once India’s most valuable startup, has taken another dramatic turn. Suspended directors of the embattled edtech firm have escalated their legal battle by challenging a recent ruling by the National Company Law Tribunal (NCLT). Their appeal, filed with the National Company Law Appellate Tribunal (NCLAT), alleges prejudice and raises serious questions about the fairness of the insolvency proceedings.
The NCLT ruling in question reinstated lenders as financial creditors of Byju’s, a move that significantly alters the power dynamics in the insolvency process. However, the suspended directors argue that this decision overlooked a crucial ₹158 crore settlement with the Board of Control for Cricket in India (BCCI), the country’s cricket governing body. This settlement, they contend, could have paved the way for Byju’s swift exit from insolvency, restoring control to its founder, Byju Raveendran.
At the heart of this dispute lies a complex web of financial maneuvers and legal interpretations. Byju’s financial troubles began when it defaulted on payments to the BCCI under a sponsorship agreement that included branding on the Indian cricket team’s jerseys. The BCCI subsequently initiated insolvency proceedings against Byju’s.
In a bid to regain control, Byju’s orchestrated a settlement with the BCCI, raising ₹158 crore to clear the dues. However, this settlement faced stiff opposition from certain lenders, particularly Glas Trust, which holds a dominant position in the Committee of Creditors (CoC) due to its substantial ₹11,432 crore claim. Glas Trust argued that the funds used for the settlement were “tainted” and should instead be directed towards repaying financial creditors.
The NCLT, in its recent ruling, appears to have sided with the lenders, reinstating them as financial creditors and leaving the BCCI settlement in limbo. This decision has drawn sharp criticism from the suspended directors, who allege a “nexus” between the tribunal and the lenders, suggesting a bias against Byju’s.
The suspended directors have now sought the intervention of a special NCLAT bench to hear their appeal. They argue that the NCLT’s decision not only disregards the BCCI settlement but also jeopardizes the company’s chances of a swift recovery. The NCLAT is scheduled to consider their plea on February 6th, a date that could prove pivotal in determining the future of Byju’s.
The outcome of this legal tussle has far-reaching implications. If the NCLAT upholds the NCLT ruling, it would solidify the lenders’ control over the insolvency process, potentially leading to a restructuring or even liquidation of Byju’s. On the other hand, if the NCLAT overturns the ruling and recognizes the BCCI settlement, it could pave the way for Byju’s to regain control and chart a course towards recovery.
This case also highlights the complexities and challenges of the Insolvency and Bankruptcy Code (IBC) in India. While the IBC aims to provide a framework for timely resolution of insolvency cases, it also leaves room for interpretation and disputes, as evidenced by the Byju’s saga. The ongoing legal battles underscore the need for greater clarity and transparency in the insolvency process to ensure fair and equitable outcomes for all stakeholders.
As the NCLAT prepares to hear the appeal, the future of Byju’s hangs in the balance. The outcome of this case will not only determine the fate of one of India’s most prominent startups but also set a precedent for future insolvency proceedings in the country.
