Supreme Court stayed the NCLAT ruling closing insolvency proceedings against Byju's and directed BCCI to deposit ₹158 crores in an Escrow Account.
On August 14, 2024, the Supreme Court issued a significant interim order in the ongoing dispute between the Board of Control for Cricket in India (BCCI) and the ed-tech firm BYJU's.
Background:
Insolvency proceedings against Byju's commenced following an order from the National Company Law Tribunal (NCLT) in Bengaluru on July 16, 2024, reported in REEDLAW 2024 NCLT Blr 07558, to initiate corporate insolvency resolution. This order came after Byju's defaulted on a ₹158.9 crore payment due to the BCCI under a sponsorship deal. The NCLT's decision involved suspending Byju's board and appointing an interim resolution professional to oversee the company's financial matters. The core issue stemmed from the "Team Sponsor Agreement" with the BCCI, established in July 2019, which granted Byju's exclusive branding rights on the Indian cricket team's kit and access to tickets for BCCI matches. Byju's was required to pay a sponsorship fee in return. While Byju's fulfilled its payment obligations through March 2022 and settled the fees for the India-South Africa series in June 2022, it failed to clear subsequent invoices, leading to a shortfall of ₹158.9 crore despite a bank guarantee of ₹143 crore being encashed.
Supreme Court Three-judges Bench of Dr. D.Y. Chandrachud, CJI., Justice J.B. Pardiwala and Justice Manoj Misra was hearing an appeal, filed by Glas Trust Company LLC, a U.S.-based lender, challenging the Order of the National Company Law Appellate Tribunal’s (NCLAT), reported in REEDLAW 2024 NCLAT Chn 08522, that closed the insolvency proceedings initiated by BCCI over a Rs. 158 Crores settlement. The Supreme Court has granted permission to file the appeal and allowed filing without a certified copy of the impugned order, reflecting procedural flexibility.
The Court has stayed the operation of the NCLAT’s order dated August 2, 2024, which had dismissed the insolvency proceedings. This stay is effective until further orders are issued by the Court. In addition to the stay, the Court has directed that the Rs. 158 Crores, realized from a settlement between BCCI and BYJU's, be maintained in a separate escrow account. This measure ensures that the funds are preserved for future directions from the Court.
Solicitor General Tushar Mehta, representing BCCI, objected to the stay, arguing that BCCI had not been given an opportunity to present its case fully and requested that the Court not stay the judgment. However, the Chief Justice clarified that the order to maintain the funds in escrow was a precautionary step and did not imply the Court’s final stance on the merits of the appeal. The appellant, Glas Trust Company LLC, through Senior Advocate Shyam Divan, contended that the settlement violated statutory provisions and highlighted ongoing enforcement proceedings against BYJU’s, including a lookout notice for its founder.
Senior Advocate AM Singhvi, representing BYJU’s, opposed the stay, asserting that it effectively grants the appellant’s appeal. The Supreme Court has scheduled a further hearing for August 23, 2024, where it will review written submissions and consider the final disposal of the civil appeal. This interim order underscores the Court’s approach to maintaining the status quo while addressing procedural and substantive issues in the dispute.
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