Byju’s Bankruptcy: US Judge weighs sanctions for two executives over alleged asset draining tactics
Byju’s Bankruptcy: Two executives, Vinay Ravindra and Rajendran Vellapalath, face potential financial sanctions in the US for allegedly draining assets from court-supervised businesses.
Byju's Bankruptcy: Two Byju's executives are under legal scrutiny in the United States for allegedly draining assets from the edtech company's businesses which are under court supervision, according to a Bloomberg report.
A US federal judge is considering millions of dollars in sanctions on Byju's chief content officer Vinay Ravindra and company ally Rajendra Vellapalath for allegedly stripping software, cash and other assets from the business, it added. Vellapalath, is also the founder of Dubai-based tech startup Voizzit Technology.
Lenders have approached the court seeking punishment for Ravindra, Vellapalath for taking over the cloud-based accounts of the US companies — Epic! Creations and Tangible Play — and allegedly draining them of more than $1 million in cash plus valuable internet platforms used by students and other assets.
Justify Actions Or Face Contempt of Court, Says Judge
Hearing the matter on December 2, US Bankruptcy Judge John T Dorsey notified the two accused that he would issue an “order to show cause” forcing them to justify their actions, or be declared in contempt of court and be required to pay financial penalties, as per the report.
Ravindra and a Byju's spokesperson did not respond to queries, the report said. Vellapalath was present for the hearing via video and argued for himself and his company. He claimed that Voizzit actually owns Epic! and Tangible Play, not Byju’s and the company had loaned Byju’s more than $100 million in 2023 and therefore had the right to take ownership of the units, as per the report.
Dorsey rejected that argument during the hearing, saying he did not “find Mr. Vellapalath to be credible.”
Notably, Byju's lenders seek to recover over $1.2 billion from the troubled start-up and are fighting to liquidate US education software companies that Byju’s purchased a few years ago for $820 million.
Founded by Byju Raveendran and his family, the company declared bankruptcy in India after defaulting on the debt it owed US lenders.
Accusations of Unethical Business Practices
In November, Nebraska businessman William Hailer told the courts that he spent months helping Raveendran try to regain control of Byju’s US software companies, which a court-supervised trustee is running. However, this failed and Hailer parted ways with Raveendran, accusing him of unethical business tactics.
Notably, Byju's companies and assets are under court supervision in both India (parent company base) the US (subsidiaries), according to a court declaration filed by Hailer. The case is Epic! Creations, Inc., 24-11161, US Bankruptcy Court, District of Delaware (Wilmington), as per the Bloomberg report.
In previous statements, Raveendran denied wrongdoing and alleged the creditors were resorting to “overly aggressive tactics”, the report said.
Lenders in the US claim Raveendran hid $533 million in loan proceeds that should have been repaid to creditors. In India, a court-appointed professional has been tasked with raising money to repay lenders as part of the company's Insolvency and Bankruptcy (IBC) proceedings.
(With inputs from Bloomberg)
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First Published:4 Dec 2024, 10:38 AM IST
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