The Supreme Court on September 25 raised concerns over the National Company Law Appellate Tribunal’s (NCLAT) decision to close insolvency proceedings against edtech firm Byju's, suggesting that the tribunal’s reasoning lacked sufficient analysis.
The court hinted that the case could be sent back to the NCLAT for reconsideration.
The bench, led by Chief Justice of India (CJI) DY Chandrachud, expressed doubts about the NCLAT's handling of the matter. "The reasoning in the NCLAT order is just a paragraph. This does not show any application of mind at all…Let the Tribunal again apply its mind and see it afresh," the CJI observed, per a report by Bar and Bench.
The apex court expressed skepticism over Byju’s decision to settle a mere Rs 158 crore owed to the Board of Control for Cricket in India (BCCI) while leaving a staggering Rs 15,000 crore in total dues unpaid to other creditors, including US-based Glas Trust.
The CJI posed a pointed question to Byju's representatives, asking, "Today you (Byju’s) have Rs 15,000 crore due. Why did you pick up only BCCI and settle it? What about others?"
Solicitor General Tushar Mehta, representing the BCCI, urged the Court not to overturn the National Company Law Appellate Tribunal's (NCLAT) decision (of allowing settlement between BCCI and Byju's), warning of the repercussions if the appeal against NCLAT's ruling was allowed.
He stated, "Please consider the consequences if the appeal is allowed."
Despite Mehta's arguments, the Court underscored that the BCCI's claim constituted a small fraction of Byju's overall financial obligations.
"BCCI has a small amount due of Rs 158 crore... What about others? They all again have to go through the entire circle," CJI Chandrachud remarked.
The case
The case stems from an appeal filed by Glas Trust Company LLC, a US-based financial creditor of Byju’s, challenging the NCLAT’s decision to halt insolvency proceedings against Think & Learn Pvt Ltd, the parent company of Byju’s.
The insolvency resolution process was initiated by the National Company Law Tribunal (NCLT) in Bengaluru in June, following a petition by the Board of Cricket Control for India (BCCI). The BCCI claimed that Byju’s owed Rs 158 crore for a cricket jersey sponsorship deal. After Byju's reached a settlement with the BCCI, where Byju’s board member Riju Raveendran agreed to clear the dues using his personal funds, the NCLAT closed the insolvency proceedings.
This decision was opposed by Glas Trust, which raised concerns that other creditors of Byju's might be left out.
Glas Trust's argument
Senior Advocate Shyam Divan, appearing for Glas Trust, criticised the NCLAT's reasoning, describing the tribunal's approach as "arithmetical" and "unacceptable."
"NCLAT is expected to carry some basic maths…Now, without any notice to us, we (Glas Trust) have been dropped entirely from the committee of creditors. This is unprofessional," he added.
Divan pointed out that Glas Trust holds a 99.5 percent stake in Byju’s debt and could not be sidelined in the decision-making process. Senior Advocate Kapil Sibal, also representing Glas Trust, emphasised that personal funds could not be used to recover dues under Section 12A of the Insolvency and Bankruptcy Code.
Byju’s response
Senior Advocates AM Singhvi and NK Kaul, representing Byju’s, denied the allegations raised by Glas Trust. Singhvi refuted claims that Byju's founder and his brother were absconding. "This is only about a large corporate entity flexing its muscles," Singhvi said.
Kaul added that Glas Trust had been inconsistent in its arguments, stating, "You (Glas Trust) keep changing your story. Sometimes you say 'round tripping', sometimes you say it is personal funds of Riju Raveendran. Ultimately the onus is on you to prove the statements being made."
The Supreme Court had previously stayed the NCLAT decision on August 14, reviving the insolvency process. On August 22, the Court declined to stay the operations of the Committee of Creditors (CoC) formed to oversee the Corporate Insolvency Resolution Process (CIRP).
The Court has suggested that the NCLAT reconsider its decision, with the case scheduled for further hearings on September 26.
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