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Mumbai: The National Company Law Appellate Tribunal (NCLAT) has provided a significant reprieve to embattled edtech firm Byju’s by setting aside its insolvency proceedings, allowing it to resolve its ₹158 crore settlement with Board of Control for Cricket in India (BCCI).
The bench was reviewing a petition by founder and chief executive officer (CEO) Byju Raveendran, who challenged the National Company Law Tribunal (NCLT) order initiating insolvency proceedings. Raveendran also requested a stay on the formation of a committee of creditors (CoC).
“In view of the undertaking given by Riju Raveendran, the settlement is hereby approved by this tribunal. The appeal by the applicant (Byju Raveendran) succeeds and impugned order dated 16 July is set aside. However, in case there is a breach of the undertaking given, the order of the NCLT shall stand revived,” the bench led by justices Sharad Kumar Sharma and Jatindranath Swain, said.
The appellate tribunal on Thursday deferred the formation of CoC as part of corporate insolvency resolution process initiated against Byju’s under the Insolvency and Bankruptcy Code (IBC) since the appeal was pending before the court. The bench also took an oral undertaking from the counsel representing the interim resolution professional that the CoC will not be formed until the tribunal passes the final orders on 2 August.
On 16 June, the NCLT had admitted the BCCI’s plea initiating a corporate insolvency resolution process against Byju’s, and appointed an interim resolution professional to oversee the firm’s daily affairs until the matter is decided.
In 2019, Byju’s had secured a deal to feature its branding on the front of the Indian cricket team’s jersey. Last June, the company extended its sponsorship agreement with the BCCI until November. Byju’s had also requested BCCI to encash a ₹140 crore bank guarantee, with an additional ₹160 crore to be paid in instalments. The BCCI eventually took the debt-laden edtech company to bankruptcy court for allegedly defaulting on ₹158 crore in dues. The NCLT ruled that insolvency proceedings should be initiated due to enough evidence of debt and default in payment.
“The presiding judge has invoked Rule 11 of the NCLAT Rules, 2016 to return the control of Think & Learn Pvt. Ltd, the holding company of Byju’s, back to its promoters. NCLAT rejected allegations made by certain US based lenders that the source of the money being used to settle the BCCI dues was not transparent or trustworthy”, Byju’s said in an official statement on Friday.
“Today, we stand not just stronger, but more united than ever. I always believed that truth eventually prevails and hard work always wins. We have nurtured Byju’s for two decades, and are committed to its mission of imparting high-quality education to students everywhere. You can never defeat a team that never gives up,” the statement added.
Senior counsel Arun Kathpalia appeared for Byju’s, with Manmeet Singh and Sairam Subramanian from Saraf and Partners briefing him.
Senior advocate Mukul Rohatgi who represented US lender Glas Trust Llc, however, strongly opposed the settlement between the BCCI and Byju’s, alleging that the money given by Riju Raveendran was tainted and stolen money and should have been paid to Glas Trust, a financial creditor to the cash-strapped firm. Rohatgi also argued that the Raveendran brothers were involved in roundtripping the monies involved in the settlement and therefore should not be allowed to proceed with the BCCI payoff. “The chaps (Byju and Riju) are fugitives from justice. There’s an Enforcement Directorate proceeding against Byju, and a lookout notice against him, and he is living in Dubai and Riju is in London,” he added.
The bench clarified that BCCI counsel Tushar Mehtahad said that it will not accept ‘tainted’ money.
“But since the money offered by Riju Raveendran is incorporated in India, it has been paid through banking channels and there is nothing like round-tripping. So, there is no hitch in accepting the money,” the bench observed.
Akshat Khetan, founder of AU Corporate Advisory and Legal Services, said: “IBC should be perceived as a mechanism for resolution rather than recovery ensuring proceedings remain free from forum shopping, thereby upholding the integrity and efficacy of the insolvency framework.”
On Thursday, Riju Raveendran in his undertaking before the NCLAT confirmed the funds that have been raised by him personally are from the sale and gains from a share sale of Think and Learn between May 2015 and January 2022. According to Riju Raveendran, he had accumulated ₹3,600 crore from the share sale. The clarification follows Glas Trust‘s allegations questioning the source of funds used for the settlement with the BCCI.
Out of the ₹3,600 crore, ₹1,050 crore was paid as income tax, Riju added. The rest, ₹2,600 crore, was infused in Think and Learn to fund operational needs of the edtech firm and ensure it continues as a going concern, including the salaries to be paid to its 27,000 employees.
On Thursday, the NCLAT had deferred the formation of a CoC as part of corporate insolvency resolution process initiated against Byju’s under the IBC, since the appeal was pending before the tribunal. The bench had also taken an oral submission from the counsel representing the interim resolution professional that the CoC will not be formed until the appellate tribunal passes its final orders on 2 August.
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