Supreme Court stays tribunal order allowing settlement between BCCI and Byju’s pending appeal by US lender

The Supreme Court on Wednesday stayed the National Company Law Appellate Tribunal’s order that allowed the Indian cricket board’s settlement with debt-laden edtech firm Byju’s.

The top court asked the Board of Control for Cricket in India, an operational creditor to Byju’s, to deposit the settlement amount of ₹158 crore in a separate escrow account until the pendency of an appeal by a US lender to Byju’s.

A bench led by Chief Justice of India DY Chandrachud was hearing an appeal filed by US-based lender Glas Trust Inc opposing the settlement. Glas Trust claimed Byju’s owes it more than ₹8,000 crore and, as a financial creditor, it should get priority in repayments.

Also Read: Byju’s insolvency proceeding set aside, NCLAT allows settlement with BCCI

While allowing the BCCI settlement, the tribunal on 2 August set aside an order of the National Company Law Tribunal initiating corporate insolvency proceedings against Byju’s after the company defaulted on repaying dues to lenders. This came after Riju Raveendran, younger brother of the edtech's founder Byju Raveendran, raised  ₹158 crore to pay the cricket board.

“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,” justices Sharad Kumar Sharma and Jatindranath Swain of the Chennai NCLAT held in its order of 2 August.

‘Tainted’ money

The counsel for US lender Glas Trust strongly opposed the settlement between the BCCI and Byju’s, alleging that the money given by Riju Raveendran was tainted and stolen and should have been paid to Glas Trust. The counsel 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.

Also read: Riju Raveendran has raised ₹158 crore to repay BCCI, Byju’s tells appeals tribunal

“They are (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,” the counsel added.

It was not immediately clear whether Wednesday's order would lead to the revival of the insolvency proceedings that the appellate tribunal had halted. Legal experts are awaiting the order for clarity.

Nirav Shah, an independent counsel and an Insolvency and Bankruptcy Code expert, said the US lender is likely trying to halt the settlement between BCCI and Byju’s because it will end the insolvency proceedings. Shah said the Supreme Court’s stay is interim in nature and the matter will be first heard on merits at length and only then will it be decided whether the NCLAT order ought to be stayed or modified.

Also Read: Byju’s challenges insolvency order in NCLAT, seeks urgent hearing amid financial turmoil

"Additionally, till the US lender provides proof that the Byju brothers have committed some sort of fraud, or the proposed settlement is tainted and not in the best interests of the creditors, it is unlikely that the Supreme Court would stay a settlement between BCCI and Byju’s. Mere accusation by US lenders of Byju brothers being fugitives is unlikely to stop any genuine potential settlement," Shah said.

Ashish Pyasi, founder of law firm Aendri Legal, had a similar view and said it is a settled law that third parties generally have no locus in a bilateral settlement.

"As on today, only an interim order was passed by the Supreme Court, so definitely Byju’s will get a chance to address the court and oppose the appeal filed by the foreign creditor," said Pyasi.

The case pertains to a deal that Byju’s signed with BCCI in 2019 to have its branding featured on the front of the Indian cricket team jersey. In June last year, Byju’s extended its sponsorship rights with BCCI till November.

The company had asked the cricket board to encash a  ₹140 crore bank guarantee, with another  ₹160 crore to be paid in instalments. Eventually, BCCI dragged Byju's to the bankruptcy court for allegedly defaulting on dues worth  ₹158 crore.