Byju’s, the biggest edtech company in India, is currently embroiled in a maelstrom of legal and financial issues that are being heard by both Indian and foreign courts. Byju’s insolvency procedures are at a standstill after the Supreme Court revoked a previous settlement with the Board of Control for Cricket in India (BCCI), marking the latest setback in its fight for stability. Here is a look at the most recent events, the participants, and Byju’s future.
A Settlement in Shambles: Supreme Court Quashes NCLAT Decision
The saga began when Byju’s faced mounting dues to BCCI, reportedly amounting to ₹158 crore. In an attempt to move past the dispute, Byju’s reached a settlement with the cricketing body. The National Company Law Appellate Tribunal (NCLAT) closed the case on the grounds of this settlement. However, in a dramatic twist, the Supreme Court overturned this decision in October, ruling that such a settlement violated the procedures under the Insolvency and Bankruptcy Code (IBC).
The crux of the Supreme Court’s decision rested on the fact that once a Corporate Insolvency Resolution Process (CIRP) begins, the Insolvency Resolution Professional (IRP) takes charge of the debtor’s affairs. Any attempt to withdraw or settle the proceedings must therefore follow strict IBC protocols, including approval from the IRP and the Committee of Creditors (CoC). This ruling not only nullified Byju’s settlement but also placed the BCCI and Byju’s back on the path of formal insolvency proceedings.
BCCI’s Next Move: Likely Withdrawal of Insolvency Proceedings
With the Supreme Court blocking the previous settlement, BCCI is reportedly considering a formal withdrawal of the insolvency proceedings it had initially filed. Sources suggest that BCCI may approach the National Company Law Tribunal (NCLT) to request this withdrawal, following proper protocol this time to avoid further legal complications. While this move could potentially offer some breathing space for Byju’s, the firm is far from clear of the legal hurdles it faces.
A Debt Crisis at the Core: US Lenders Demand Control
While Byju’s grapples with the BCCI proceedings, its challenges with US-based creditors add another layer of complexity. The company’s troubles with its US lenders, led by Glas Trust, originated in June 2023, when Byju’s missed an interest payment on a $1.2 billion term loan. This triggered accusations from Glas Trust, which alleged that Byju’s had defaulted on its loan obligations. Byju’s, on the other hand, contends that the loan terms were being manipulated to the company’s disadvantage, further souring relations with its creditors.
In response to the Supreme Court’s recent ruling, Byju’s US lenders have asked the NCLT to remove the IRP overseeing the company’s insolvency proceedings and to constitute a fresh Committee of Creditors (CoC). This step, if granted, would intensify pressure on Byju’s as the lenders seek greater control over its finances and recovery processes.
Credits: Education Post
Leadership Under Pressure: Byju Raveendran’s Commitment to Turnaround
Byju’s founder and CEO, Byju Raveendran, remains resolute amid the turbulence. Speaking about the challenges, Raveendran expressed his determination to lead Byju’s through this crisis, despite the mounting setbacks. “I have been on the edge so many times… I only need to see 1 percent chance to make it work,” he said. However, the CEO also acknowledged the difficulties in securing fresh funding, particularly after several board members stepped down, casting uncertainty over investor confidence in Byju’s ability to stabilize.
The recent mass resignations from the board have made raising funds nearly impossible, Raveendran noted. Byju’s, once a symbol of India’s burgeoning edtech sector, now faces a liquidity crisis that demands swift resolution to prevent long-term impacts on its operations.
The Road Ahead: Negotiations, Legal Battles, and Strategic Pivots
Byju’s predicament is an unprecedented combination of regulatory, financial, and operational challenges. In addition to insolvency and repayment negotiations with Indian authorities, the company is also entangled in disputes across US courts. Negotiations with Glas Trust and other US-based creditors are ongoing, though their demands for stricter loan compliance and immediate repayment only add to the complexity.
