The Court had issued notice to Byju Raveendran, his company Think and Learn Private Limited and the BCCI.
| Photo Credit: ANI

The Supreme Court on Thursday (August 22, 2024) did not heed repeated requests by debt-ridden ed-tech firm Byju’s and the Board of Control for Cricket in India (BCCI) to defer the Committee of Creditors (CoC) from meeting.

A three-judge Bench headed by Chief Justice of India D.Y. Chandrachud had, on August 14, stayed the operation of a National Company Law Appellate Tribunal (NCLAT) decision allowing Byju’s to pay a settlement amount of ₹158 crore to the BCCI.

Also Read: How India’s Byju’s went from startup star to facing insolvency

The order followed an appeal filed by U.S.-based lender Glas Trust Company Limited liability company (LLC), a financial creditor — which said it had a claim of ₹8,500 crore over the ed-tech firm.

On August 22, the Bench gave Glas Company, represented by senior advocate Shyam Divan, time to respond to an affidavit filed by the opposite party.

Senior advocate A.M. Singhvi, for Byju’s, said the court must “balance equities” on its side too. Solicitor General Tushar Mehta, for BCCI, said “98% of the CoC was Mr. Divan’s client”.

Mr. Divan said his client had not constituted a CoC. Senior advocate Kapil Sibal, who joined the hearing on the side of Mr. Divan, said the stay order on August 14 was itself a result of the court’s prima facie findings leaning in favour of Glas.

The NCLAT decision on August 2 allowing the settlement, was based on the reasoning that BCCI would not accept any tainted money. The amount of ₹158 crore was offered by Riju Raveendran, Byju’s brother. It was generated in India, for which income tax was paid. The money was received through banking channels.

Glas had argued that the “drill of the law” was not followed in the settlement between Byju’s and the BCCI. The U.S. lender had said, as a major financial creditor, it should have gotten priority in repayments. Mr. Singhvi had described Glas’s appeal as a show of ego.

“Apart from an ego, he (Glas) has a claim of ₹8,500 crore,” the Chief Justice reacted.

The Court had issued notice to Byju Raveendran, his company Think and Learn Private Limited and the BCCI.

Representational image of the Byju’s logo
| Photo Credit: Reuters

The Supreme Court on Wednesday (August 14, 2024) revived insolvency proceedings against Byju’s by putting a previous tribunal order on hold, in a victory for U.S. lenders that say they are owed $1 billion by the education technology company.

The Supreme Court order is a setback to company founder Byju Raveendran who earlier this month regained control of the startup that was once India’s most valuable at $22 billion.

ALSO READ: How Byju’s went from startup star to facing insolvency

Byju’s did not immediately respond to a request to comment on the court order.

The company was undergoing insolvency proceedings following a complaint by the BCCI which said it was not paid sponsorship dues. The two sides subsequently settled the dispute and an appeals tribunal halted the insolvency proceedings.

A revival of the proceedings will put control of the company back in the hands of a court-appointed insolvency administrator.

The Supreme Court on Wednesday agreed to hear an appeal by U.S.-based Glas Trust, which represents some lenders of a Byju’s group company, putting on hold the earlier order that had quashed insolvency proceedings against Byju’s.

Chennai:

A judicial member of the National Company Law Appellate Tribunal (NCLAT), Chennai, on Monday recused himself from hearing a plea by Byju’s Founder Byju Raveendran against the insolvency petition against his company, Think & Learn Private Ltd.

Justice Sharad Kumar Sharma, a judicial member of the Chennai bench of the NCLAT, recused himself stating that he had appeared for the Board of Control for Cricket in India (BCCI) as a senior counsel in a number of cases.

“I will not venture into this. I have been a regular counsel for the BCCI in a number of cases,” he said.

He also directed that the case be placed before the NCLAT Chairperson for the nomination of an appropriate bench.

The NCLT, Bengaluru, had ordered insolvency proceedings against Think & Learn Private Ltd following a BCCI petition claiming a default of Rs 159 crore.

The NCLT had earlier appointed Pankaj Srivastava as an interim resolution professional to oversee the management of Byju’s, temporarily suspending the power of the board of directors.

Byju Raveendran had moved the NCLAT against the insolvency proceeding order.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

Byju’s logo.
| Photo Credit: REUTERS

Byju’s founder Byju Raveendran on March 2 said the edtech company will not be able to pay salaries to employees as the recent funds raised through a rights issue are inaccessible due to a legal dispute with certain investors.

In a letter to staff, Mr. Raveendran said the rights issue, launched a month ago, has been successfully closed.

“This was supposed to be a happy correspondence. After all, we now have funds to meet our short-term needs and clear our liabilities. However, I regret to inform you that we will still be unable to process your salaries,” he said.

In the letter — seen by PTI — Mr. Raveendran said the company is still striving to ensure that salaries are paid by March 10.

“We shall make these payments the moment we are permitted to do so as per law,” he added.

Further, Mr. Raveendran said that last month, the company faced challenges due to a lack of capital, and “now we are experiencing a delay despite having funds”.

“Unfortunately, a select few (4 out of our 150 plus investors) have stooped to a heartless level, ensuring that we are unable to utilise the funds raised to pay your hard-earned salaries,” Mr. Raveendran said.

“At their behest, the amount raised through the rights issue is currently locked in a separate account,” he added.

Mr. Raveendran accused these select investors of having a callous disregard for the lives and livelihoods of others even though they had reaped substantial profits from investment in Byju’s.

“It is an agonising reality that some of these investors have already reaped substantial profits — in fact, one of them has made a staggering eight times their initial investment in BYJU’S. And yet, their actions convey a callous disregard for our lives and livelihoods,” he said in the letter.

Mr. Raveendran noted that he has fought fearlessly and tirelessly, “leaving no stone unturned” to find a way to honour the company’s commitment to employees.

“Countless hours have been spent exploring every possible avenue, engaging our legal teams, and advocating for your rights. However, despite our best efforts, we are left with no option but to confront the heart-wrenching reality that we are temporarily unable to provide you with the financial support you deserve,” he said.

Earlier this week, a company law court had asked the embattled edtech firm to consider extending the closing date of the $200 million rights issue, a request that the management had hinted it would not accept even as estranged investors flagged technicalities that prevented the closure of the issue on Wednesday.

In an interim order dated February 27, the National Company Law Tribunal (NCLT), Bengaluru Bench said the funds received by the company in respect to the rights issue should be kept in a separate escrow account, and it should not be withdrawn till the disposal of the matter.

The next hearing has been listed for April 4.

The select group of investors in Byju’s alleged that the edtech giant siphoned off $533 million in an obscure hedge fund in the U.S. and had sought a stay on a $200 million rights issue, calling it illegal and contrary to law.

In a high-voltage corporate drama that unfolded last month, Byju’s shareholders (prominent investors) voted unanimously for removing Founder-CEO Raveendran and his family from the board over alleged “mismanagement and failures” at what was once India’s hottest tech startup but the company hit back calling the voting done in the absence of founders as invalid and ineffective.

Sources close to the investors had earlier said more than 60% of the shareholders voted in favour of all the seven resolutions at the EGM, which included removing the current management, reconfiguration of the board and a third-party forensic investigation into acquisitions done by the company.

The once-storied edtech startup, Byju’s rose to dizzying heights before it faced a series of setbacks.

While the return of students to physical classes post-pandemic and the recent acquisition of Aakash put Byju’s under a financial strain, the edtech firm in the last one year suffered other issues, including its auditor resigning, lenders beginning bankruptcy proceedings against a holding company, and a US lawsuit disputing the terms and repayment of a loan.

Majority of Byju’s shareholders on Friday voted unanimously for removing founder CEO Byju Raveendran and his family from the board over alleged “mismanagement and failures” at what was once India’s hottest tech startup, but the company dug in its heels, calling the voting done in absence of founders as invalid and ineffective.

Founder CEO Raveendran Byju, his wife and brother – the only three members on company board as of now – stayed away from the extraordinary general meeting (EGM) called by a group of six investors, who collectively hold more than 32% in Think & Learn (T&L), the firm that operates online tuition platform Byju’s.

At the end, more than 60% of the shareholders voted in favour of all the seven resolutions, which included removing the current management, reconfiguration of the board and a third party forensic investigation into acquisitions done by the company.

Prosus – one of the six investors who had called the EGM – in a statement said “shareholders unanimously passed all resolutions put forward for vote.

“These included a request for the resolution of the outstanding governance, financial mismanagement and compliance issues at Byju’s; the reconstitution of the board of directors, so that it is no longer controlled by the founder of T&L; and a change of leadership of the company.” Sources with direct knowledge of the matter said the EGM was to start at 0930 hours on Friday but was delayed for almost an hour as around 200 people, some of them Byju’s employees, sought to join the virtual meet.

Only after due verification the investors were let in, they said, adding some 40 people representing the investors were allowed in and voted on the resolution moved by some investors.

However, the outcome of the vote at the EGM will not be applicable until March 13, when the Karnataka High Court will next hear Raveendran’s plea challenging the move by certain investors to call the meeting.

The High Court on Wednesday had refused to stay the EGM but stated that any resolution passed shall not be given effect till the next date of hearing. Raveendran and family own 26.3% in the company.

Byju’s in a statement, issued before the EGM results were declared, said it “firmly declares that the resolutions passed during the recently concluded EGM – attended by a small cohort of select shareholders – are invalid and ineffective. The passing of the unenforceable resolutions challenges the rule of law at worst.” Ahead of the EGM, four out of the six investors, on Thursday evening filed an oppression and mismanagement suit against the management of the company in the Bengaluru bench of the NCLT, seeking declaring of founders, including CEO Byju Raveendran, as unfit to run the company, appointment of a new board, declaring the just-concluded rights issue as void and a forensic audit of accounts.

A Byju’s spokesperson reacting to the news of suit being filed said the company has not received any formal intimation of any such petition. “Indian regulation stipulates due process for conducting an EGM, intimation of petitions being filed in NCLT, etc. But certain shareholders prefer to manufacture a media spectacle as opposed to following due process.” Sources said as per the process, the National Company Law Tribunal (NCLT) will issue notices once the petition gets admitted.

“As shareholders and significant investors, we are confident in our position on the validity of the EGM meeting and its decisive outcome, which we will now present to the Karnataka High Court in line with due process,” Prosus said.

Byju’s in its statement cited the Karnataka High Court order and said “coupled with numerous procedural irregularities and deficiencies, invalidates the resolutions passed by a select, narrow group of shareholders.” “These resolutions were voted upon without the valid constitution of a quorum, as stipulated in BYJU’S Articles of Association (AoA). According to Articles 38 and 39(a) of the AoA, at least one founder-director is required to form a valid quorum.

“As the founders did not participate in the meeting, the quorum was never legitimately established, rendering the resolutions null and void,” it said, adding “only around 20% of the number of shareholders attended this farcical EGM.” Byju’s referred to the number of shareholders and not the shareholding they hold in the company.

“The founders maintain that this purported EGM was designed to provoke a trial by the media and is fundamentally devoid of merit, having been brought forward by a select few shareholders as part of a self-serving agenda against the company and its founders,” it said.

“In any event, these resolutions merely request the Board to “consider” the recommendations passed at the EGM. They do not have any binding effect whatsoever on the company or its decision-making processes. As such, the resolutions lack the necessary authority to impose any obligations on Byju’s or its directors.” Investors have also sought a forensic audit of the company in the plea filed before the NCLT on Thursday evening, according to a court filing. They sought declaring the present management as unfit to run the company and appointing a new CEO and a new board. The plea also wants a forensic audit and a direction to the management to share information with the investors.

Sources said the plea also seeks a declaration of the just-concluded $200 million rights offer as void and sought a direction that the company should not take any corporate actions that will prejudice the rights of the investors.

The petition has been signed by four investors — Prosus, GA, Sofina, and Peak XV — along with support from other shareholders, including Tiger and Owl Ventures.

The edtech firm in the last one year suffered other setbacks, including its auditor resigning, lenders beginning bankruptcy proceedings against a holding company and a U.S. lawsuit disputing the terms and repayment of a loan.

Byju’s was valued at $22 billion in 2022 and it is now valued at $200 million in a rights issue.