Byju's Insolvency: Supreme Court Halts Creditors Committee From Holding Meetings
US-based lenders, represented by Glas Trust LLC, were removed from the committee of creditors even after establishing that their voting share in the committee by value is 99.41%.
The Supreme Court reserved its judgment on Thursday in Byju's insolvency case after a hearing that lasted one-and-a-half days.
The court stated that the committee of creditors for the ed-tech company would not be allowed to hold meetings until the judgment is delivered.
During the hearing, senior counsels Shyam Divan and Kapil Sibal represented the US-based lenders, while senior counsels Abhishek Manu Singhvi and Neeraj Kishan Kaul represented the ed-tech firm.
Bollywood director Vidhu Vinod Chopra, known for films such as 3 Idiots and Munna Bhai MBBS, was also present in the courtroom.
US Lenders’ Stance
Representing a group of 37 financial institutions, Glas Trust LLC challenged the National Company Law Appellate Tribunal's approval of the settlement in the case, which effectively ended Byju’s insolvency proceedings.
Glas argued that Byju’s owes the lenders over Rs 8,000 crore, and that NCLAT ended the insolvency process following a small settlement of Rs 158 crore between Byju’s and the BCCI.
The lenders stated that the Court of Chancery and the Delaware Supreme Court had already ruled in their favour, affirming the validity of their $1.2 billion claim.
It was also argued that the NCLAT's order of Aug. 2, which approved the settlement between Byju’s and the BCCI, required the settlement to be completed by Aug. 9. However, payment was made on 13 August. "The insolvency process should have been revived based on this technicality alone. It was a self-operative order," Divan argued.
The lenders further challenged their removal from the creditors' committee, stating that they were excluded even though their voting share by value was 99.41%.
“We were removed from the CoC without any notice,” Sibal said.
The lenders sought to convince the court by pointing to other issues with the ed-tech firm. They highlighted that Byju’s faces significant liabilities and that both directors, Byju Raveendran and Riju Raveendran, are abroad—one in Dubai and the other in London.
“Media reports have noted an ED investigation into Byju Raveendran for alleged violations of FEMA provisions," Divan said.
It was also argued that Byju’s statutory auditor resigned, citing financial and governance concerns.
Byju’s Rebuttal
At the start, Singhvi clarified that there is no personal investigation against anyone and that the ED investigation mentioned by the lenders is against the company, not Byju Raveendran.
Singhvi argued that Byju Raveendran is being treated like a criminal by a foreign distressed fund, which has no relevance in the current case.
It was also argued that when the NCLAT approved the settlement between Byju’s and the BCCI, it allowed Glas to file a separate application as a financial creditor to recover its dues. However, this was not done.
Glas' dues might have come into question if the lenders had filed a separate application.Byju’s
It was argued that Glas’ debts are not due until November 2026, but they are claiming them by invoking the accelerated action clause for recovery.
The court was also informed that Byju and Riju are not flight risks as they regularly visit India. “Byju was in India just last month," Kaul said.
It was further said that the two brothers have been using their own funds to keep the company operational.
On Aug. 14, the top court ordered a stay on the National Company Law Appellate Tribunal's approval of Byju's settlement with the Board of Control for Cricket in India over dues to the tune of Rs 158 crore.
In effect, the top court’s order meant that the insolvency process, which was brought to a halt by the NCLAT, stood revived.
Last month, the NCLAT approved Byju's settlement with the BCCI, putting an end to its insolvency process. According to the settlement, Byju's committed to settling its dues with the BCCI, with payments scheduled for Aug. 2 and Aug. 9.
Approving the settlement, the NCLAT said that if payments are not made according to schedule, the insolvency process will be resumed.
US-based lenders, represented by Glas Trust LLC, are opposing the settlement based on the allegation that the money being used for the said settlement was siphoned from them and its sources are questionable.
Post the revival of the insolvency process and the subsequent formation of the committee of creditors, the US-based lenders were removed from the committee even after establishing that their voting share in the CoC by value is 99.41%.
Adding to the ed-tech firm's troubles, the Delaware Supreme Court backed the US-based lenders over a $1.2 Billion loan default by the ed-tech firm.
Notably, in a statement issued on September 24, Byju's stated that the Delaware verdict has no bearing on the ongoing legal proceedings in India and that its actions are detrimental to all stakeholders involved.
