SC refuses to pass interim order to stop setting up of CoC in insolvency proceedings against Byju’s

New Delhi, Aug 20 (PTI) The Supreme Court on Tuesday refused to pass an interim order to restrain the Insolvency Resolution Professional (IRP) from constituting a committee of creditors (CoC) in the insolvency proceedings involving embattled ed-tech firm Byju’s.

In a major setback to Byju’s, the top court had on August 14 stayed the verdict of insolvency appellate tribunal NCLAT setting aside the insolvency proceedings against the ed-tech major and approving its Rs 158.9 crore dues settlement with the Indian cricket board.

Senior advocate Abhishek Singhvi, appearing for Byju’s, urged a bench comprising Chief Justice D Y Chandrachud and Justices JB Pardiwala and Manoj Misra that the IRP should not be allowed to constitute a CoC.

The stay of the NCLAT order by the apex court would mean that the insolvency proceedings would be revived and, normally, the CoC is constituted at the end, Singhvi said.

Solicitor General Tushar Mehta, appearing for the Board of Control for Cricket in India (BCCI), supported the firm and said the pending plea will attain finality if the CoC is constituted without a hearing.

“The matter will become infructuous if they create a CoC in two days,” Singhvi said.

The bench, which agreed to hear the plea on Thursday, however, did not pass any order to restrain the possible development.

The top court had earlier stayed the verdict of the National Company Law Appellate Tribunal (NCLAT) setting aside the insolvency proceedings against the ed-tech major and approving its Rs 158.9 crore dues settlement with the Indian cricket board.

The August 2 verdict of the National Company Law Appellate Tribunal (NCLAT) had come as a huge relief for Byju’s as it had effectively put its founder Byju Raveendran back in control.

The top court, however, had prima facie termed the NCLAT verdict as “unconscionable” and stayed its operation while issuing notices to Byju’s and others on the appeal of the ed-tech firm’s US-based creditor Glas Trust Company LLC against the judgement of the insolvency appellate tribunal.

The case stemmed from Byju’s default on a Rs 158.9 crore payment related to a sponsorship deal with the BCCI.

The top court had directed the BCCI to keep a sum of Rs 158 crore it had received from Byju’s after a settlement in a separate escrow account till further orders.

“Issue notice. Pending further orders there shall be a stay of the impugned order of August 2 of NCLAT. In the meantime, BCCI shall maintain the amount of Rs 158 Crores,which shall be realised in pursuance of a settlement, in a separate escrow account until further orders,” the bench had said.

The bench had not agreed to the submission of the BCCI that the NCLAT order be not stayed without hearing from the cricket board.

Singhvi had said that a stay would lead to revival of the CoC which was set up following the institution of insolvency proceedings against Byju’s.

The NCLAT had approved the Rs 158.9 crore dues settlement with BCCI and set aside the insolvency proceedings against Byju’s.

Byju’s had entered into a “Team Sponsor Agreement” with the BCCI in 2019. Under the agreement, the ed-tech firm got exclusive rights to display its brand on the Indian cricket team’s kit and some other benefits. Under the agreement, Byju’s had to pay a sponsorship fee. The company met its obligations till the middle of 2022 but defaulted on subsequent payments of Rs 158.9 crore.

After insolvency proceedings were initiated, Byju’s entered into a settlement with the BCCI.

On July 16, the Bengaluru bench of the National Company Law Tribunal had admitted ‘Think and Learn’, Byju’s parent company, to the insolvency resolution process on a plea filed by the BCCI over default in payment of outstanding dues of almost Rs 158.9 crore.

While suspending the board of the ed-tech firm, the NCLT had appointed an interim resolution professional to run the operations of the company, suspended the company’s board of directors, and brought it under moratorium by freezing its assets.

The US-based lenders suspected that the settlement amount was being diverted from the credit they had extended to Byju’s.

The appellate tribunal had also dismissed the allegation of ’round-tripping’ levelled by Byju’s US-based lenders, saying they failed to provide any evidence in support of their claims.

The NCLAT order, however, had a caveat: Any failure to make payments on the specific dates mentioned in the undertaking would automatically lead to a revival of the insolvency proceedings against Byju’s.

The tribunal had said the money was paid by Riju Raveendran (brother of Byju Raveendran) through the sale of his shares, taxes have been duly paid and payment is coming through proper banking channels.

As per the undertaking, Riju Raveendran had made a payment of Rs 50 crore on July 31, 2024 against the outstanding dues owed by Byju’s to the BCCI. Another Rs 25 crore had to be submitted after a few days, and the remaining Rs 83 crore on August 9 through Real Time Gross Settlement (RTGS).

The NCLAT had noted the submissions of the solicitor general that BCCI had no objection in receiving money from Riju if it is clean and has come through proper channels.