Byju Raveendran has lost immediate operational control of his edtech startup following the admission of an insolvency petition against it by India’s powerful cricket board, months after key investors sought to oust him from the company he founded.
The National Company Law Tribunal on Tuesday appointed a bankruptcy professional who will oversee Byju’s day-to-day operations while it hears an insolvency petition filed against the online tutor by the Board of Control for Cricket in India.
BCCI dragged the former sponsorship partner of the Indian cricket team to the bankruptcy court for allegedly defaulting on dues worth ₹158 crore. Tuesday’s order was the first in the matter.
A Bengaluru bench of the tribunal said “there is no reason to deny the petition… since the existence of a debt and a default in the payment of debt is clearly established”.
The NCLT bench led by Justices K. Biswal and Manoj Kumar Dubey appointed Pankaj Srivastava as the interim insolvency resolution professional to oversee Byju’s operations until the matter is closed.
The resolution professional’s main responsibility is to collate information on the entire dues that Byju’s owes to all its stakeholders, and create a committee of creditors, said Alok Dhir, founder and managing partner at law firm Dhir & Dhir Associates. “In theory, the management is then passed on to the hands of the creditors.”
Also read | Mint Explainer: NCLT admits insolvency plea against Byju’s. Here’s what it means for the edtech platform
On Tuesday, NCLT also referred an oppression and mismanagement case filed by Byju’s investors MIH Edtech and General Atlantic to a division bench.
The latest developments come just as it appeared that Byju’s, once India’s most valuable startup, had got some respite from the several legal cases it’s embroiled in amid a financial crisis and an escalating battle with some key investors.
On Monday, Surfer Technologies withdrew its insolvency plea against Byju’s, informing NCLT that it had reached a settlement with the edtech firm, which may lead to the withdrawal of its petition.
Byju’s had sought to, but couldn’t, score a similar out-of-court settlement with the cricket board.
Byju’s had in 2019 signed up to have its branding featured on the front of the Indian cricket team’s jersey. In June last year, Byju’s extended its sponsorship rights with BCCI till November 2023. The company had asked the cricket board to encash a ₹140 crore bank guarantee, with another ₹160 crore to be paid in instalments.
BCCI approached NCLT in September against Byju's parent company, Think and Learn Pvt. Ltd, for defaulting on dues worth ₹158 crore.
According to the NCLT order on Tuesday, Byju’s has never disputed that it was required to pay the agreed fee as per its agreement with BCCI.
“However, despite having acknowledged the dues, the Corporate Debtor (Byju’s) has failed to pay, and instead the Corporate Debtor repeatedly kept requesting the BCCI for extension of time for payment,” NCLT said in a 38-page order.
In November, Byju’s had hinted at possible talks with BCCI for a settlement. But the company’s financial crisis hasn’t allowed it to pay the dues to the cricket board, or the debt it owes to other creditors.
In January this year, Byju’s approached the NCLT in the BCCI case urging it to refer the parties to arbitration. The tribunal on Tuesday said this application was “not maintainable”.
“In the BCCI matter, the debt amount is huge,” said Saumya Brajmohan, partner at law firm Solomon & Co. “There is considerable pressure on (Raveendran) to strike a deal but it is also much tougher considering he has lost control of assets, operations and management of Byju’s.”
In February, a consortium of four Byju’s investors—Prosus NV, General Atlantic, Sofina, and Peak XV Partners, with support from Tiger Global and Owl Ventures—moved the NCLT against the edtech firm’s contentious $200 million rights issue.
Under the insolvency process, all legal cases against Byju’s will enter a moratorium period, pausing the proceedings. But that would also result in the edtech firm’s efforts to raise $200 million through the rights issue becoming futile, hindering its ability to settle its dues, including to BCCI.
Byju’s overseas investors have also dragged the company to a court in Delaware over a $1.2-billion term loan B (TLB). They have also filed an insolvency petition before NCLT’s bench in Bengaluru seeking to recover the loan.
Brajmohan added that if Byju’s arrives at an out-of-court settlement with BCCI before the committee of creditors is formed, the resolution professional can inform NCLT and secure an order to stop the insolvency proceedings.
“However, if the settlement is not reached after CoC has been formulated, Byju’s may need to get a majority approval for the settlement to be valid,” said Brajmohan.
Also read | Byju's: Battle for control
