Today(on 22nd August), The Supreme Court declined to stay the operations of the Committee of Creditors overseeing Byju’s insolvency, with the Bench led by CJI DY Chandrachud emphasizing that decisions will follow a thorough examination of the case.
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NEW DELHI: Today(on 22nd August), The Supreme Court of India, declined to impose any stay or defer the operations of a recently formed Committee of Creditors (CoC) overseeing the corporate insolvency resolution process (CIRP) initiated against the prominent ed-tech company, Byju’s. The decision was made by a Bench comprising Chief Justice of India (CJI) DY Chandrachud, Justice JB Pardiwala, and Justice Manoj Misra. The Bench emphasized that any decision regarding the CoC proceedings would be made only after a thorough examination of the case on its merits.
The CJI highlighted the importance of reviewing the case in depth before any such stay order could be issued.
“If we dismiss the appeal, it will negate everything. If we reject their appeal, they cannot subsequently invoke Section 12A. We need to review the case on its merits.”
-remarked the CJI, indicating that a hasty decision could have far-reaching consequences.
The Court subsequently adjourned the matter until Tuesday, August 27, signaling the need for further deliberation.
The ongoing legal battle stems from an appeal filed by a creditor challenging the decision to close insolvency proceedings against Think & Learn Pvt. Ltd., the parent company of Byju’s. Initially, the Supreme Court had, on August 14, stayed the order of the National Company Law Appellate Tribunal (NCLAT), effectively reviving the insolvency process against Byju’s. This stay has kept the insolvency proceedings active, which were first initiated in June 2023 by the National Company Law Tribunal (NCLT), Bengaluru.
The root of the insolvency proceedings lies in a plea filed by the Board of Control for Cricket in India (BCCI) after Byju’s defaulted on a payment of approximately Rs.158 crores, which was related to Indian cricket team jersey sponsorship deals. The June order, however, was challenged before the NCLAT in Chennai. The appellate tribunal had halted the insolvency process in July, following the BCCI’s announcement that it had reached a settlement with Byju’s.
During the NCLAT proceedings, Byju’s founder, Byju Raveendran, assured the tribunal that the outstanding amount would be paid by his brother, Riju Raveendran, who is the largest shareholder of Byju’s, from his personal funds. Despite this assurance, Glas Trust, a financial creditor, expressed concerns that the money intended to repay the BCCI might come from a sum of $533 million that Byju’s allegedly owes to other financial creditors. Glas Trust had objected to the halting of the insolvency process, fearing misuse of funds.
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After the NCLAT dismissed Glas Trust’s objections and halted the insolvency process, the financial creditor escalated the matter to the Supreme Court, seeking relief. The top court responded by reviving the insolvency proceedings on August 14, while simultaneously staying the NCLAT order that had put a temporary end to the CIRP.
In the latest hearing, the formation of the CoC became a focal point of discussion. Byju’s legal representative, Senior Advocate Dr. AM Singhvi, informed the Court-
“Just 12 hours ago, the Committee of Creditors was formed, with 98 percent representation from the US-based company. An email was sent to IRP Mr. Dinkar, who is handling the Section 7 application.”
This statement highlighted the rapid developments surrounding the formation of the CoC, with a significant portion of the creditors reportedly being from a US-based entity.
Contrary to Byju’s claims, Senior Advocate Shyam Divan, representing Glas Trust, refuted the formation of the CoC.
He stated-
“I have not framed any COC. This is incorrect. This Mr. Dinkar is the IRP in the application by BCCI.”
This contradiction further complicated the proceedings, leading to a debate over the legitimacy of the CoC’s formation.
Adding to the complexity, Solicitor General Tushar Mehta, appearing on behalf of the BCCI, also urged the Supreme Court to stay the CoC’s operations.
He argued-
“Let the Committee of Creditors’ meeting be deferred or stayed. How can a 98 percent majority make decisions?”
Mehta emphasized that allowing the CoC to proceed without a stay would essentially mean granting the appeal, which could undermine the balance of equities in the case.
“Equities must be balanced.”
-he reiterated, underscoring the need for careful consideration of all parties involved.
Despite these arguments, the Supreme Court maintained its position and refused to issue a stay on the CoC’s operations for the time being. The Bench clarified that any decision would be made only after a comprehensive hearing on the merits of the case.
The legal teams representing the various parties in this high-stakes case include Senior Advocate Dr. AM Singhvi, along with advocates Zulfiquar Memon, Waseem Pangarkar, and Nadiya Sarguroh from MZM Legal LLP, representing Byju Raveendran.
On the other side, Solicitor General Tushar Mehta, assisted by advocate Kanu Agrawal and briefed by Argus Partners, is representing the BCCI.
Senior Advocate Shyam Divan, along with advocates Prateek Kumar, Raveena Rai, Smriti Nair, Nishant Sharma, and Anshula Laroiya from Khaitan & Co, is appearing for Glas Trust LLC.
The next hearing on this case, scheduled for August 27.
