The Supreme Court on Thursday directed the interim resolution professional (IRP) of Byju’s to maintain status quo and not hold any meetings of the Committee of Creditors (CoC).
A bench comprising Chief Justice of India (CJI) DY Chandrachud, along with Justices JB Pardiwala and Manoj Misra, reserved its verdict in the appeal filed by US-based lender Glas Trust, challenging the National Company Law Appellate Tribunal’s decision to stay the insolvency proceedings against Think and Learn Pvt Ltd, the parent company of Byju’s.
“Until the judgment is pronounced, the interim resolution professional will maintain the status quo and will not hold any creditors’ committee meetings,” the court said.
Solicitor General Tushar Mehta, acting on behalf of the Board of Control for Cricket in India (BCCI), set conditions for a possible settlement, including ensuring that payments would not come from Byju’s assets. He reiterated that their condition for accepting the money from Byju’s was that it had to be ‘clean’, tax-paid money and from a proper channel.
During the hearing, the court asked Byju’s and the BCCI whether the rules, particularly Regulation 30A of the Insolvency and Bankruptcy Code (IBC), permit a settlement outside the laid down procedures.
This rule concerns a request for withdrawal submitted to the company court.
Shyam Divan, acting for the US-based lender, said there was a loss of Rs 8,104.68 crore in March 2022 and certain documents were not provided to them. He also raised issues with Byju’s default claims, pointing out that the company’s auditor resigned in September 2024, possibly due to the company’s financial condition.
The Supreme Court on Wednesday expressed concern over the National Company Law Appellate Tribunal’s (NCLAT) order closing the insolvency proceedings against troubled edtech firm Byju’s, saying the appellate court had “completely disregarded the situation”.
“See the reasoning in the NCLAT order, which is just a paragraph (paragraph 44). This does not show application of mind at all… Let the tribunal reapply its mind and look at it afresh,” Chief Justice of India DY Chandrachud said while hearing the appeal filed by US-based lender Glas Trust Company, which challenged the NCLAT order approving the Rs 158-crore settlement between the edtech company and the BCCI.
The high court also asked Byju’s lawyers why they chose to settle with BCCI alone when there are multiple other lenders. “When the size of the debt is so huge, can one creditor walk away and say one promoter is ready to pay me? Why take up BCCI and settle with them alone? Out of your personal assets? You are today in debt of Rs 15,000 crore,” the CJI said.
The Supreme Court said, “We will send it (Byju’s case) back to NCLAT; let them reconsider it, let them use their mind and see where the money is coming from,” the CJI had noted.
The NCLAT had on August 2 observed that “the money offered by the largest shareholder and former promoter (Riju Raveendran) has nothing to do with the US lenders, which gives the court power to rule”.
It was also said that Tushar Mehta, acting for the BCCI, had said that they would not accept “tainted” money and that the money offered was income generated in India. The appeals tribunal noted that the money came through a proper channel.
Mehta had pleaded with the Supreme Court not to quash the NCLAT verdict. “Please consider the consequences if the appeal is allowed,” Mehta said.
The CJI, however, said that though the BCCI amount is only Rs 158 crore, there are others who will be affected if they close the insolvency proceedings against Byju’s. “BCCI is owed a small amount of Rs 158 crore… What about others? They will all have to go through the whole circle again,” the CJI said.
Background
The Court of Appeal had stated in its ruling of 2 August that the settlement was reached before the Committee of Creditors (CoC) could be formed. Since the source of the money (before the settlement) was not in dispute, there was no reason to keep the company in the insolvency process.
Byju’s US-based lenders had opposed the settlement. They had told the NCLAT that the money used for repayment is tainted as it is part of $533 million that had gone ‘missing’.
Riju Raveendran, brother of company founder Byju Raveendran and a board member, had told the NCLAT that the money paid to BCCI was “clean”. His lawyer had told the court that the money paid to BCCI was not part of the “missing” $533 million as claimed by the US-based lenders. The missing money is at the heart of a fight between the US-based lenders and Byju’s parent company Think & Learn.
A day after the NCLAT order gave Byju control of his company, he filed a notice in the Supreme Court seeking to be informed if the US-based lenders decided to appeal against the order. Glas Trust then filed a petition in the Supreme Court challenging the NCLAT order.
First publication: Sep 26, 2024 | 7:52 PM IST