Byju Raveendran, founder of Byju's (Think & Learn Pvt Ltd), may find some temporary relief after the National Company Law Appellate Tribunal (NCLAT) halted insolvency proceedings and approved a settlement between the company and the Board of Control for Cricket in India (BCCI).
However, this decision has sparked significant debate about the integrity and state of insolvency proceedings in India. Legal experts have expressed concern over the ruling, with some stating that it undermines the Insolvency and Bankruptcy Code (IBC).
“This order seems like a mockery of the Insolvency and Bankruptcy Code,” commented one legal expert.
On August 2, NCLAT approved a settlement between the parties, noting that it was reached before the Committee of Creditors (CoC) could be formed. The source of the payment, which came from one of the ex-promoters and shareholders of the Corporate Debtor, was not disputed.
As a result, the appeal was successful, the settlement was sanctioned, and the previous order was overturned. Control of Think & Learn Private Limited, the parent company of Byju's, was returned to its promoters.
As part of the settlement, Riju Raveendran, the largest shareholder of Byju's and brother of Byju Raveendran, made a payment of Rs 50 crore on July 31 towards the Rs 158 crore owed to BCCI. An additional Rs 25 crore is to be paid on Friday, with the remaining Rs 83 crore due by August 9. However, concerns remain about the larger financial obligations that Byju's still faces.
Vivek Parti, an Insolvency Professional, highlighted the potential consequences of the NCLAT order, stating, "This order passed by NCLAT favors the promoter. Prior to the admission of BCCI's application, an operational creditor, there were Section 7 applications with significant default amounts pending. Though they were allowed by NCLT to file claims in the Corporate Insolvency Resolution (CIR) process, the decision to admit these claims will take time. This delay gives the promoter more time to siphon money or alienate assets."
Legal experts have questioned why Raveendran was given this opportunity despite defaulting with many other creditors. The decision to settle Rs 158 crore in insolvency while facing much larger debts has raised red flags. Although there are mechanisms for BCCI to restore its position and for Section 7 applications to be restarted, the urgency and motivations behind Raveendran's settlement strategy remain under scrutiny.
Meanwhile, US-based Glas Trust approached the Indian court to prevent the quashing of insolvency proceedings for the ed-tech giant, as lenders represented by the trust are owed USD 1 billion. There were concerns about the legitimacy of the funds being used by Raveendran for the settlement. However, Byju's representatives presented evidence to NCLAT showing that Riju Raveendran was using his own funds, supported by income tax filings, and not company or creditor funds.
Despite the settlement with BCCI, Byju's still faces multiple unresolved claims, including Rs 1 crore owed to Oppo Mobiles India Private Limited, Rs 6.7 crore to Cogent E-services Limited, Rs 1.7 crore to McGraw Hill Education India Pvt Ltd, and Rs 13 crore to I-energizer. Sources also suggest a disputed claim of approximately Rs 13 crore with Oppo, which Byju’s contests.
Beyond these debts, Raveendran still has substantial outstanding payments related to salaries and vendor obligations. The company asserts that it is gradually addressing these dues.
Legal professionals have criticized the judicial approach, suggesting that it often amounts to pursuing avoidance applications after the damage has been done, rather than addressing issues proactively.
While the NCLAT’s decision may seem like a partial victory for Byju’s, the company continues to face significant challenges. These include a USD 200 million escrow account, a rights issue by investors, and ongoing legal battles. The resolution of these issues remains a point of concern for creditors and stakeholders.
