The Karnataka High Court has prohibited the Committee of Creditors (CoC) of Byju’s parent company, Think and Learn, from meeting or making decisions until the National Company Law Tribunal (NCLT) rules on applications to replace the current Resolution Professional. This followed a petition by Glas Trust Company, which raised concerns over creditor voting rights. The NCLT is set to reconvene, influencing Byju’s insolvency resolution.
Karnataka: In a significant development, the Karnataka High Court recently barred the Committee of Creditors (CoC) of Think and Learn, Byju’s parent company, from convening meetings or making decisions on the company’s affairs until the National Company Law Tribunal (NCLT) issues its ruling on pending applications to replace the company’s Resolution Professional (RP). This order has temporarily paused decision-making by creditors in Byju’s ongoing insolvency case.
The High Court order, dated October 25, emerged from a petition by Glas Trust Company. Glas Trust sought intervention since the NCLT was not in session at the time. The court granted an interim stay on the CoC meeting originally scheduled for that day. However, with the NCLT resuming sessions from November 4, Justice Hemant Chandangoudar clarified in his latest ruling that Glas Trust’s petition had served its interim purpose and directed the NCLT to address all pending applications, including any additional filings from involved parties, within two weeks.
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The interim stay has been extended until NCLT decides on the pending applications, reinforcing a temporary freeze on the CoC’s activities. In a noteworthy allowance, the court has permitted the RP to approach the NCLT for the disbursement of funds to cover essential expenses such as salaries, statutory dues, and other operational costs, which the NCLT will review after hearing all parties.
Glas Trust’s Plea for RP Replacement
On November 4, both Aditya Birla Finance and Glas Trust Company formally applied to replace the current RP for Byju’s parent company, citing concerns about the RP’s conduct. In particular, Senior Advocate Uday Holla, representing Glas Trust, highlighted that the RP classified only one creditor as a financial creditor, effectively giving this creditor 100% voting rights in the CoC after disqualifying Glas Trust and Aditya Birla Finance. This issue is pivotal as CoC members possess voting rights that can direct the company’s Corporate Insolvency Resolution Process (CIRP), while operational creditors lack voting rights in CoC meetings.
Supreme Court’s Intervention in Byju’s Insolvency Saga
This ongoing legal tussle follows a Supreme Court decision on October 23, where Glas Trust successfully appealed the National Company Law Appellate Tribunal (NCLAT)’s decision to halt Byju’s insolvency proceedings. The Supreme Court set aside the NCLAT order, which had accepted a settlement between Byju Raveendran, Byju’s founder, and the Board of Control for Cricket in India (BCCI). The matter now rests with the NCLT for further action in the insolvency case.
Sources close to the proceedings indicate that Glas Trust is challenging the unilateral voting power granted to a single creditor, asserting it raises questions about transparency and fair representation in Byju’s insolvency process. Given the High Court’s recent order, all eyes are now on the NCLT to determine the future course for the RP and CoC governance within Think and Learn.
This case underscores the critical role of judicial oversight in complex corporate insolvencies, with implications for the governance and resolution processes of high-profile companies like Byju’s. As the NCLT prepares to reconvene, stakeholders anticipate decisions that could reshape Byju’s financial restructuring and its ongoing insolvency journey.
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