US-Ruled Bankruptcy of Byju’s Units Countered By Indian Official

(Bloomberg) -- A US court ruled that it will grant creditors’ request to put several units tied to struggling Indian education technology company Byju’s into bankruptcy, according to court papers filed on Thursday. 

The decision, made at a Tuesday hearing, will lead to involuntary Chapter 11 bankruptcy of Byju’s units including Neuron Fuel Inc., Epic! Creations Inc. and Tangible Play Inc., the papers showed. The order was made as a default judgment for discovery sanctions.

The creditors, led by HPS Investment Partners, filed the petition in June, accusing company founder Byju Raveendran of violating their debt contracts by refusing to give them financial details about the three units. Judge Brendan Shannon also granted lenders’ request to appoint an independent Chapter 11 trustee to manage the Byju units in bankruptcy.

Epic and the other Byju units opposed the forced bankruptcy. In a September court filing, they claimed that the lenders lacked legal standing to initiate the bankruptcy and argued the filings were an improper “tactical maneuver“ meant to get an edge over the Byju units in related litigation.

The development was “surprising” and “in conflict” with Think & Learn Private Limited’s insolvency proceedings in India, wrote Pankaj Srivastava in a letter following the decision. Srivastava, Byju’s Interim Resolution Professional, appointed earlier this year is requesting to stay the effect of the bankruptcy. 

The “Resolution Professional has the duty to take control of the corporate debtor’s assets,” Srivastava wrote, citing Indian insolvency law. He didn’t appear at the hearing, court papers showed. 

The Indian official and the US creditors have been in dispute with each other in the complicated cross-border bankruptcy procedures. US lenders to Byju’s were removed from an influential creditors committee in India — a decision made by Srivastava. 

It’s unclear whether the request from the Indian official will change the ruling. Byju’s petitioning creditors said they “disagree with the letter” and asked the judge to sign the order so that the bankruptcy could take effect, adding that the letter is informal. As of Friday at noon, there’s been no public disclosure of an order being signed by the judge. 

--With assistance from Jonathan Randles and Reshmi Basu.

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