New Delhi: In a major setback to an embattled Byju’s, the Supreme Court on Wednesday 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.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 on Wednesday 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 Board of Control for Cricket in India (BCCI).
“We are staying the judgement (of NCLAT). This is unconscionable,” observed the bench which comprised Chief Justice D Y Chandrachud and Justices JB Pardiwala and Manoj Misra.
The top court 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 said.
The bench did not agree to the submission of Solicitor General Tushar Mehta, appearing for the BCCI, that the NCLAT order be not stayed without hearing the cricket board.
“Kindly don’t stay the judgement, let it remain. I am saying this before your lordships for the first time that we are not heard. We have an answer to everything,” Mehta said.
The bench said it has not asked the BCCI to deposit the money with the court but in a dedicated escrow account.
It also did not agree with the submission of senior advocate Abhshek Singhvi, who represented the troubled ed-tech firm, that the NCLAT order be not stayed without hearing the Byju’s.
It, however, concurred with the contention of senior advocate Shyam Divan, representing the US-based lender, that the NCLAT verdict deserved to be stayed.
Singhvi said a stay will lead to revival of the committee of creditors (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 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.
The NCLAT verdict brought the ed-tech company out of the corporate insolvency resolution process and placed the promoters back in control of the board of directors.
“In view of the undertaking given and affidavit filed, the settlement between the parties is hereby approved and as a result, the appeal succeeds and impugned order (passed by NCLT, Bengaluru ) is set aside,” the NCLAT had ordered on August 2.
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 NCLAT had observed that the source of the payment being made “is not in dispute” nor related to the foreign funds as alleged by the US-based creditors.
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.