Winning Bizness Desk

Mumbai, October 23, 2024: The Supreme Court has overturned a decision by the National Company Law Appellate Tribunal (NCLAT) that had approved a ₹158 crore settlement between ed-tech giant Byju’s and the Board of Control for Cricket in India (BCCI). This ruling could lead to insolvency proceedings against Byju’s. On Wednesday, the Supreme Court, led by a bench under Chief Justice D.Y. Chandrachud, ruled that the ₹158.9 crore payment should instead be deposited with the company’s Board of Creditors. The court’s decision could have significant implications for Byju’s as it battles financial difficulties and mounting legal challenges.

Background of the Dispute

The case dates back to August 14, 2024, when the Supreme Court initially stayed the NCLAT's approval of the settlement between Byju’s and BCCI. The court had ordered that the ₹158 crore settlement amount be placed in a separate account until further hearings. The decision came after US-based lender Glass Trust, representing some of Byju’s creditors, filed an appeal with the Supreme Court on August 7. Glass Trust challenged the NCLAT's order allowing the settlement between Byju’s and BCCI, raising concerns about the legitimacy of the payment.

Lenders’ Opposition and Allegations

The creditors, particularly Glass Trust, strongly opposed the settlement, questioning its legality and accusing Byju’s of financial misconduct. Senior lawyer Mukul Rohatgi, representing the lenders, called the agreement a "tainted settlement" and accused Byju’s of using "stolen money" to make the payment. Rohatgi argued that Byju’s founders, including CEO Byju Raveendran, had conspired to misappropriate $500 million, claiming that the settlement funds were part of this misappropriated sum. "This is our money that they have siphoned off," Rohatgi stated during court proceedings.

NCLAT’s Earlier Approval of the Settlement

On August 2, 2024, NCLAT had approved the settlement agreement between Byju’s parent company, Think & Learn Pvt Ltd, and the BCCI. The agreement, reached on July 31, stipulated that Byju’s would pay BCCI ₹158 crore for outstanding sponsorship dues. Byju’s had agreed to make the payments in two installments—one on August 2 and the other on August 9. However, this settlement faced immediate opposition from creditors, leading to the Supreme Court's intervention.

Impact on Byju’s Control and Insolvency Proceedings

The Supreme Court’s ruling may have serious ramifications for Byju’s. Following the NCLAT's earlier approval of the settlement, Byju Raveendran had regained control of the company. Prior to this, on July 16, the National Company Law Tribunal (NCLT) had initiated insolvency proceedings against Byju’s, stripping Raveendran and the board of their control over the company. Under the Insolvency and Bankruptcy Code (IBC) of 2016, when a company enters insolvency proceedings, its management is taken over by a resolution professional. With the Supreme Court's latest ruling, Byju’s may once again face insolvency actions, potentially leading to a loss of control for its current management. This legal development adds to Byju’s ongoing challenges as the company struggles to manage its financial obligations and navigate multiple legal disputes.