On August 20, 2024, the Supreme Court of India denied Byju's request to prevent the resolution professional from forming a committee of creditors while the court considered the case. The Supreme Court’s decision not to grant interim relief means that the formation of the committee, a critical step in the insolvency resolution process, will proceed as planned. The court has scheduled a detailed hearing on the matter for August 22, 2024.
The case, which centres on the insolvency proceedings of Byju's, comes after a significant legal development on August 14 (REEDLAW 2024 SC 08532), when the Supreme Court revived the insolvency case against the company. This action followed a petition by Glas Trust Inc., a US-based lender, which claims that Byju's owes over ₹8,000 crore and should be prioritized for repayment. The court’s revival of the case suspended the National Company Law Appellate Tribunal's (NCLAT) earlier order (REEDLAW 2024 NCLAT Chn 08522) that had annulled the insolvency proceedings.
The Supreme Court's recent ruling also included a directive for the Board of Control for Cricket in India (BCCI), an operational creditor in this case, to deposit ₹158 crore from Byju's into an escrow account until the resolution of an appeal by the US lender. The court's decision to deny Byju's plea was influenced by concerns that forming the committee of creditors before the case is fully heard could be premature.
Byju’s management, faced with these legal challenges, has communicated to employees that it has been unable to pay July salaries due to the Supreme Court's stay on the NCLAT’s favourable decision. The company’s founder, Byju Raveendran, has assured employees that salaries will be paid once the management regains control of the company's finances.
The insolvency case involves a 2019 sponsorship deal between Byju's and the BCCI, which had led to a default on dues worth ₹158 crore. The NCLAT's earlier decision had set aside the insolvency proceedings initiated by the National Company Law Tribunal order (REEDLAW 2024 NCLT Blr 07558) after Byju's failed to pay the amount due.
The Supreme Court’s ruling to deny interim relief raises questions about the future of Byju’s insolvency process. Legal experts anticipate that while the court will eventually address the merits of the case, any potential settlement between Byju’s and the creditors will be carefully scrutinized. The court’s decision may significantly impact the ongoing insolvency proceedings and the company’s financial stability.
The outcome of the detailed hearing scheduled for August 22 will be crucial in determining the path forward for Byju’s insolvency case and addressing the broader implications for the stakeholders involved
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