NCLT admits BCCI’s plea seeking insolvency proceedings against Byju’s

The bench in an order said it cannot be disputed that Byju’s parent company has availed the services of BCCI through sponsorship rights. On examining a trail of e-mails between BCCI and Byju’s, the bench said it is clearly established that “there is an outstanding debt owed to the Operational creditor (BCCI) and there is a default on the part of the Corporate Debtor (Think & Learn)”.

The plea brought by the BCCI is one of multiple bankruptcy cases Byju’s is fighting in India and abroad. “It is contented that these emails were the admission of the debt owed by the Corporate Debtor (Think & Learn) and the default had occurred since there was request for extension of the time repeatedly,” the order said. With the order allowing insolvency proceedings against Think & Learn, the company is now subjected to a moratorium on the sale, transfer, or disposal of any of its assets for a period of 180 days, along with other restrictions.

In its order, the NCLT bench appointed Pankaj Srivastava as the Interim Resolution Professional (IRP), who is required to file his written consent within one week. Once Srivastava’s appointment is confirmed, he will have full control over the management of the affairs of Think & Learn, whose board of directors will also be suspended, as per Section 17 of the IBC Act, 2016. In its order, the NCLT bench ordered the IRP and ordered him to constitute a Committee of Creditors after collation of all claims received against Think & Learn within 30 days from the date of his appointment.

The IRP would take immediate custody and control of all the assets of the corporate debtor (Byju’s), including the business records; represent and act on behalf of the corporate debtor with third parties, exercise rights for the benefit of the corporate debtor in judicial, quasi-judicial or arbitration proceedings; raise interim finances subject to the approval of the committee of creditors and appoint accountants, legal or other professionals.

The NCLT bench also ordered Srivastava to constitute a Committee of Creditors after collating all claims received against Think & Learn within 30 days from the date of his appointment. In its first meeting, the CoC will appoint a full-time IRP. The order is set to impact Byju’s other defaults as well, as the IRP is required to collect all information relating to the assets, finances and operations of Think & Learn, including list of all liabilities to collate and club claims of default by other financial and operational creditors, who will be a part of the CoC.

“We wish to reach an amicable settlement with BCCI and we are confident that, despite this order, a settlement can be reached,” a spokesperson for Byju’s said in a statement. “In the meantime, our lawyers are reviewing the order and will take necessary steps to protect the company’s interests.”

As per details mentioned in the order, Think & Learn defaulted on a total of 12 invoices raised by BCCI following numerous international tours and series played by the Indian national cricket team. The BCCI had mentioned August 21, 2022 as the date of first default, that is, the date on which 50 per cent amount was payable and default occurred.

Currently, the amount unpaid and owed to BCCI stands at Rs 158.9 crore, after Think & Learn allowed BCCI to encash the bank guarantee of Rs 143 crore in January last year. “Thus, there is no dispute, in so far as the facts of this case are concerned that the amount raised by the invoices are due and payable, constituting “default” under Section 3(12) of the IBC (Insolvency and Bankruptcy Code),” the order said.

Before the NCLT bench, Think & Learn pushed for the dismissal of the application by BCCI, arguing that the agreement with BCCI for sponsor rights lapsed on March 31, 2022. However, the bench concluded that the raising of invoices is a sufficient indicator that Think & Learn was availing of BCCI’s services even after the agreement lapsed.

In January this year, Byju’s had filed an application with NCLT for arbitration. However, the BCCI in its response had said when a petition under Section 9 of the IBC is present before the Adjudicating Authority, the Adjudicating Authority may either admit or dismiss the petition and that insolvency matters are not arbitral. BCCI had filed the petition on September 23, 2023.

The Bengaluru bench of NCLT on Tuesday said the application for referring the matter for arbitration is not maintainable and rejected it. “…it is abundantly clear as laid down by the Hon’ble Apex Court that the Adjudicating Authority has to either reject or Admit the Application and cannot postulate a third option. In this matter, the application U/s 9 of the IBC has been admitted by the Order passed today, therefore, the application for referring the matter for Arbitration is not maintainable,” it said.

BCCI’s claim represents one of the largest among Byju’s creditors. However, several other companies have also raised substantial claims against the edtech firm. The NCLT decision, announced on Tuesday, has come at a crucial stage for the startup.

NCLT recently restrained Byju’s from going ahead with its second rights issue. The issue commenced on May 13 and was to end on June 13. The tribunal also directed Byju’s from utilising any funds that it has so far collected from the second rights issue, and the same needs to be deposited in a separate account.

The order was passed in an application filed by the investors of the company such as Peak XV Partners, General Atlantic, Chan-Zuckerberg Initiative and Prosus. The investors had filed a plea in the NCLT to halt Byjus’ second rights issue as it would further dilute their holding in the company.

At an extraordinary general meeting (EGM) in February, a group of investors passed resolutions for the removal of Byju Raveendran, his wife Divya Gokulnath, and brother Riju Raveendran from the company’s leadership. The validity of the resolutions is now before the Karnataka High Court. Despite laying off thousands of employees and making massive expenditure cuts over the past year, Byju’s valuation has been in free fall, and the company has defaulted on loans taken from US lenders.

Byju’s is in urgent need of funds, and faces huge financial losses, a barrage of legal suits, and massive investor backlash. Its valuation has fallen below $1 billion (Rs 8,300 crore). Netherlands-based tech investor Prosus last month said it has written off its 9.6 per cent stake in troubled edtech firm Byju’s involving a fair value loss of $ 493 million (Rs 4,115 crore).

Full order:

BCCI – NCLT ORDER by Express Web on Scribd