Byju's-BCCI Reconcile But US Lenders Raise Concerns Over Source Of Settlement Funds

Beleaguered edtech firm Byju's has committed to settling its dues with the Board of Control for Cricket in India by next week, with payments scheduled for Aug. 2 and Aug. 9. Senior advocate Arun Kathpalia, representing the embattled edtech firm, made this submission during the National Company Law Appellate Tribunal hearing on Wednesday.

The BCCI has also agreed that it has arrived at a settlement with the company.

However, the proposed settlement has raised concerns about the source of the funds. US lenders have accused the company's founder, Byju Raveendran, of misappropriating Rs. 500 crore, alleging that he is using these funds to resolve the dispute with the BCCI.

In response to these allegations, the NCLAT has requested that Byju's provide an undertaking that the settlement amount for the BCCI does not come from misappropriated funds. Notably, Riju Raveendran, brother of Byju Raveendran and a major shareholder in the company is personally covering the payment, not the company.

The matter is going to be taken up next Thursday at 2 p.m.

The BCCI had sought a one-day adjournment at the NCLAT on Tuesday, hinting at ongoing negotiations and a potential settlement with Byju's. This development comes as the NCLAT hears Byju Raveendran's petition challenging the initiation of insolvency proceedings against Think & Learn Pvt., Byju's parent company.

The Bengaluru bench of the National Company Law Tribunal had initiated corporate insolvency resolution proceedings against Think & Learn Pvt. on July 16, following Byju's default on a Rs 158.9 crore payment to the BCCI. As a result, the NCLT suspended the company's board and appointed an interim resolution professional to manage its debts.

Byju's Co-Founder and CEO, Byju Raveendran, is contesting the NCLT's decision at the NCLAT and had also filed a petition with the Karnataka High Court, seeking a stay on the NCLT order until the appeal is heard.

Byju's, once valued at $22 billion, has experienced a sharp decline, worsened by the reopening of schools after the Covid-19 pandemic, which reduced the demand for its online education services. In January, BlackRock reduced Byju's valuation to $1 billion.

The company's troubles began two years ago when it missed financial reporting deadlines and failed to meet revenue projections by more than 50%. In February, a group of investors, including Prosus and Peak XV, attempted to remove Raveendran during an extraordinary general meeting, citing allegations of mismanagement and failure. Raveendran has denied these allegations and contested the validity of the vote.

A key issue in Byju's financial problems is the "Team Sponsor Agreement" with the BCCI, established on July 2019. This agreement granted Byju exclusive rights to display its brand on the Indian cricket team's kit, advertise during cricket telecasts, and receive tickets for every BCCI-organized match. In exchange, Byju had to pay a sponsorship fee to the BCCI.

Byju's met its payment obligations only until March 2022 and fully paid for the India-South Africa series in June 2022. However, it failed to settle subsequent invoices, resulting in a shortfall even after a bank guarantee of Rs 143 crore was encashed. The unpaid sponsorship fees for various series and tours from August 2022 to January 2023 amount to Rs 158.9 crore.

The NCLT order pointed out that Byju's had utilised the BCCI's services but failed to meet its financial commitments, pushing the company further into insolvency.