New SC nullifies NCLAT decision in Byju case

The Supreme Court on Wednesday set aside a ruling by the National Company Law Appellate Tribunal (NCLAT), allowing a ₹158 million settlement between education technology company Byju’s and the Board of Control for Cricket in India (BCCI).

A three-judge bench headed by Chief Justice of India DY Chandrachud said there were “serious deviations” in the procedure adopted to take the case to the NCLAT itself.

The court said the application for withdrawal from the Corporate Insolvency Resolution Process (CIRP) should have been moved through the Interim Resolution Professional (IRP) and submitted to the National Company Law Tribunal (NCLT) for approval.

“Firstly, there was no formal application brought to request the withdrawal of the CIRP. The settlement agreement was registered and approved by the NCLAT based on the submissions and assurances of the lawyer before it and the representations/undertakings made by the parties. Further, the first defendant (Byju Raveendran), who is a former director of the corporate debtor (educational technology company), did not move the application through the IRP and instead directly approached the NCLAT,” Chief Justice Chandrachud, author of the trial, pointed out.

Even the request to approve the ₹158 million settlement was placed before the NCLAT during the appeal process instead of being placed before the NCLT.

“Despite these serious deviations, the NCLAT still proceeded to approve the agreement and annul the CIRP, invoking its inherent power under Rule 11 of the NCLAT Rules,” the Supreme Court highlighted.

The ruling upheld the locus standi of US-based lender Glas Trust Company LLC, which filed an appeal against the NCLAT decision.

The high court, however, said it would not be appropriate to rule on the objections raised by Glas on the merits of the deal.

“The issues raised are the subject of several litigations in different forums, including the Delaware Court and investigations by various authorities, including the Enforcement Directorate, which are pending,” explained Judge Chandrachud.

Noting that a Committee of Creditors (CoC) was constituted during the pendency of the high-end court case, the Bank gave the parties freedom to invoke their remedies or seek withdrawal or settlement of claims in accordance with the legal framework governing withdrawal of CIRP .

“Nothing in this judgment should be interpreted as a conclusion about the conduct of any of the parties or other interested parties involved in the insolvency process,” the court stressed.

Separate escrow account

The court directed that the settlement amount of ₹158 million along with accrued interest, held in a separate escrow account based on its August 14 order, be deposited with the CoC.

The CoC has been directed to keep this amount in an escrow account until further developments and to comply with any further instructions from the NCLT.

The NCLAT on August 2 granted relief to the embattled education technology company, quashing the insolvency process after approving a ₹158.9 million dues settlement with the BCCI. Byju’s entered into a team sponsor agreement with BCCI in 2019.