Observing that the National Company Law Appellate Tribunal (NCLAT) did not apply its mind while closing the insolvency proceedings against the ed-tech major, a bench headed by Chief Justice D Y Chandrachud hinted that it may send back the dispute for fresh adjudication.
The NCLAT, on August 2, granted relief to the embattled ed-tech firm by setting aside the insolvency proceedings against it after approving its Rs 158.9 crore dues settlement with the Board of Control for Cricket in India (BCCI).
The verdict had come as a huge relief for Byju’s as it had effectively put its founder Byju Raveendran back in control.
However, the relief remained short-lived as the top court, on August 14, 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 judgment of the insolvency appellate tribunal.
On Wednesday, the top court bench, also comprising justices J B Pardiwala and Manoj Misra, commenced the hearing on the plea of the US-based creditor against the NCLAT verdict.
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“The company is in debt of Rs 15,000 crore. When the quantum of the debt is so large, can one creditor (BCCI) walk away saying one promoter is ready to pay me,” the CJI asked. “Why pick up BCCI and settle with them only from your personal assets,” the bench said, adding “The NCLAT accepts this all without applying its mind to it.”
The bench, which will resume the hearing on Thursday, hinted that it send the case back to the insolvency appellate tribunal for fresh adjudication by applying its mind to the source of money.
While senior advocates Abhishek Singhvi and N K Kaul appeared for Byju’s, Kapil Sibal and Shyam Divan represented the US firm.
Solicitor General Tushar Mehta appeared for the BCCI which was earlier asked to keep the amount of Rs 158.9 crore, received as part of the settlement, in a separate bank account.
At the outset, Divan argued for the US firm and assailed the NCLAT verdict, saying it should not have stopped the insolvency proceedings against Byju’s following the settlement of the amount claimed by the BCCI.
Stressing that it was a case of “round-tripping”, Divan said the BCCI was paid by Riju Raveendran, brother of Byju Raveendran, and the money was “tainted”.
On the other hand, Singhvi and Kaul said the money was paid by Riju Raveendran from his personal assets and the same has been adverted to by the US firm during the proceedings at Delaware Court there.
They said there was nothing wrong with NCLAT’s order closing the case.
The law officer said that the BCCI got its claim from the personal assets of a person and there was nothing wrong in closing the insolvency proceedings initiated at the behest of the cricket board.
On September 17, the US firm told the bench that it was wrongly removed from the committee of creditors (CoC) by the interim resolution professional (IRP) dealing with the insolvency proceedings against Byju’s.
“I am the guarantor, which has the stakes of Rs 12,000 crore in the firm (Byju’s). My stake is 99.41 per cent and this has been reduced to zero by the IRP,” Sibal had said, adding that those having stakes of 0.59 per cent now have 100 per cent.
“I do not want the IRP to proceed,” he had said.
The US firm said the NCLAT, on the ground that the pleas are pending in the top court, refused to pass any order on its fresh petition against IRP Pankaj Srivastava. Sibal sought a stay on the proceedings at the CoC.
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.
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 (NCLT) 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.