Supreme Court cancels Byju’s BCCI settlement, revives insolvency proceedings and freezes ₹158 crore payment

the Supreme Court of India revoked the settlement agreement between Byju’s and the Board of Control for Cricket in India (BCCI), thereby reinstating the ongoing insolvency proceedings against the ed-tech company. The ruling mandates that the ₹158 crore payment made by Byju’s to BCCI as part of the settlement be transferred to an escrow account under the control of the Committee of Creditors (CoC), pending further review.

The decision came from a bench led by Chief Justice Dhananjaya Y Chandrachud, who highlighted the importance of involving all stakeholders in the settlement discussions. The court affirmed the legal right of Byju’s US-based lender, Glas Trust, to raise objections and participate as a stakeholder in the proceedings. Glas Trust raised concerns about potential misappropriation of funds and preferential treatment given to BCCI over other creditors, indicating that this could undermine the interests of those owed money by Byju’s.

Previously, the National Company Law Appellate Tribunal (NCLAT) had approved the settlement on August 2, which had halted bankruptcy proceedings initiated after BCCI alleged that Byju’s had defaulted on sponsorship payments related to the Indian cricket team's jerseys. The NCLAT's approval was contingent upon an assurance that the repayment to BCCI would come from personal funds of Riju Raveendran, a significant shareholder in Byju’s, rather than the company's assets. However, the Supreme Court criticized the NCLAT for bypassing established legal protocols set out in the Insolvency and Bankruptcy Code (IBC).

In its ruling, the Supreme Court emphasized that the NCLAT should not have invoked its discretionary powers to halt the bankruptcy process without adhering to the procedural requirements specified in the IBC. The bench, which included Justices JB Pardiwala and Manoj Misra, noted that clear procedures exist for halting and withdrawing bankruptcy proceedings, and these should not be overlooked.

Byju’s legal representatives, led by senior counsel Abhishek Manu Singhvi, defended the settlement by asserting that the funds used to satisfy the BCCI debt originated from Raveendran’s personal resources, obtained from the sale of shares of Think and Learn, Byju’s parent company. However, the Supreme Court's ruling imposes additional scrutiny on Byju’s, as the company is now required to address the claims of all creditors, including BCCI and Glas Trust, through the CoC.

Glas Trust's objections have brought attention to broader issues surrounding Byju's financial practices, including allegations of fund misappropriation and concerns regarding the classification of the ₹158 crore payment as a preferential payment to BCCI, which could negatively impact the standing of other creditors in the insolvency process.