The National Company Law Tribunal (NCLT) on January 29 ordered disciplinary action against the resolution professional (RP) handling Byju’s insolvency case, citing misconduct and actions that were detrimental to the proceedings and stakeholders.
The NCLT also ordered the reinstatement of both US-based Glas Trust and Aditya Birla Finance into the Committee of Creditors (CoC) after they were removed by the RP last year.
In a major win for the creditors, the bench said the RP’s decision to exclude them from the CoC was invalid.
The RP had constituted the CoC on 21 August last year following the Supreme Court's order that led to the resumption of Byju's insolvency proceedings. The CoC back then included both Glas Trust and Aditya Birla Finance. However, on 31 August, the RP reconstituted the CoC, removing both the creditors.
The CoC, which now includes both the creditors, would take a call on appointing a new RP in place of Pankaj Srivastava.
"The Interim RP is directed to convene a meeting of the CoC as constituted on 21st August 2024 and submit their recommendation on appointment of the Resolution Professional," the Bar and Bench website quoted the NCLT as saying.
"Any resolutions passed by the invalid CoC (from September 3, 2024, onwards) are also nullified," the tribunal added.
Misleading conduct
The tribunal directed the Insolvency and Bankruptcy Board of India (IBBI) to initiate a disciplinary inquiry against the RP, saying his conduct was misleading and not in line with expectations from an officer of the tribunal.
"The conduct of the IRP in the present case has been filed with the intent to mislead the tribunal ...The above conduct on part of IRP needs to be dealt by way of disciplinary proceeding by the IBBI. Hence, the IBBI may conduct the necessary investigation in this matter," the Bar and Bench website quoted the NCLT as saying.
The tribunal is yet to rule on an application by the Board of Control for Cricket in India (BCCI) seeking to settle its dispute with beleaguered edtech firm.
Background
The order comes amid a string of accusation made by Glas Trust and Aditya Birla against Srivastava over their alleged disqualification from the CoC.
The RP said Glas Trust did not meet the requirement of representing at least 51 percent of the lender and removed it from CoC in September.
On September 4, the lenders had issued a statement accusing Srivastava of engaging in "fraudulent actions" to unlawfully remove Glas Trust from the CoC and filed a petition with the tribunal seeking a stay on committee meetings.
They alleged that Srivastava, who had previously confirmed Glas Trust's inclusion in the CoC, abruptly changed course, backdating documents and rescheduling meetings "in secret" without informing Glas Trust or its advisers.
The disqualification had the potential to severely undermine the US lenders' position in their pursuit of accelerated repayment of $1.35 billion loan and penalties.
Glas Trust and Aditya Birla Finance had approached the NCLT, arguing that the RP had recognised only one financial creditor, creating a CoC with a single entity holding 100 percent voting rights.
The dispute stems from the Supreme Court’s August 14 ruling which quashed NCLAT's approval of Rs 158 crore-settlement between Byju’s and BCCI, halting bankruptcy proceedings against the edtech firm.
Glas Trust had opposed the settlement, arguing that as a creditor, it should get priority in repayments over BCCI, an operational creditor.
The top court sent the matter back to NCLT for a fresh settlement. After the Supreme Court set aside NCLAT's order, BCCI moved to withdraw the insolvency plea against Byju's.
The tribunal will next decide BCCI’s application and other pending matters related to Byju’s insolvency.
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