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Informist, Wednesday, Oct. 23, 2024

 

--SC sets aside NCLAT order to approve BCCI-BYJU's deal in IBC case 

 

NEW DELHI – The Supreme Court on Wednesday set aside the National Company Law Appellate Tribunal's order approving the settlement deal between debt-ridden Think & Learn Pvt. Ltd., the parent of online educational services company BYJU'S, and its operational creditor, the Board of Control for Cricket in India. The apex court said the appellate tribunal erred in allowing the withdrawal of the insolvency application by invoking its inherent powers. Consequently, Think & Learn's insolvency proceedings have been reinstated in the tribunal now. 

 

A Bench, led by Chief Justice of India D.Y. Chandrachud, said that when there is a specific procedure provided for the withdrawal of insolvency applications, the appellate tribunal can't invoke its inherent powers. The top court said that as per regulations, an application for withdrawal of insolvency proceedings has to be sent by the insolvency resolution professional and not by the parties themselves. "There was no formal application made for withdrawal, the first respondent (Byju Raveendran), who was a former director of corporate debtor (Think & Learn), had moved the NCLAT directly. Despite these grave deviations, the NCLAT still approved the settlement," the top court said.

 

The Bench, also comprising Justice J.B. Pardiwala and Justice Manoj Misra, said inherent powers can't be exercised to subjugate the legal process. The appellate tribunal should have instead stayed the composition of the committee of creditors of Think & Learn, it said. The top court also said that the amount of INR 1.58 billion, which was asked to be maintained in a separate escrow account, will be deposited into the escrow account of the committee of creditors, and will be maintained by the latter. On Aug. 14, the top court had asked the cricket board to keep INR 1.58 billion, realised in the settlement, in a separate account.

 

The top court said that Think & Learn's US lender GLAS Trust Co. LLC, the petitioner in the case, was not an unrelated party and has been recognised as the same under the insolvency process. Therefore, there is no doubt that GLAS Trust Co. falls under the category of any entity aggrieved to challenge the insolvency order in the appellate tribunal.

 

"The NCLT cannot be considered a post office that will stamp such withdrawal applications being moved by the IRP (interim resolution professional). It was never fathomed that withdrawal would be a unilateral process. When withdrawal is sought before the CoC (committee of creditors) is constituted, the NCLT must hear all parties," the top court remarked.

 

On Aug. 2, the appellate tribunal had set aside the order passed by the Bengaluru bench of the National Company Law Tribunal in July to start insolvency proceedings against Think & Learn. However, the appellate tribunal had said that the insolvency proceedings would automatically be revived against Think & Learn if there was a breach of undertaking given by its Co-Founder Byju Raveendran on payment to the cricket board. The appellate tribunal had passed the order after it was informed that the parties had arrived at a settlement in the insolvency case. Riju Raveendran, the brother of Byju Raveendran and one of the largest shareholders of the company, would pay off the dues of the cricket board, the parties had told the tribunal.

 

Contesting the payment by the debt-ridden company as a settlement to the cricket board, GLAS Trust Co. moved the apex court. "We are left with nothing, these two Raveendrans have voluntarily gone for insolvency in the US. There is nothing on record to show that they have any money. It can't be that there (in the US) you are a defaulter and here you come to India and say I'll pay," Advocate Mukul Rohatgi, appearing for the US lender, had said. Further, Rohatgi had said the brothers were fugitives and there is an Enforcement Directorate probe against Byju Raveendran. 

 

GLAS Trust Co. also challenged its removal from Think & Learn's committee of creditors and sought the removal of the resolution professional of the company. GLAS Trust said it was a financial creditor of the debt-ridden company and had over 19% vote share. However, the interim resolution professional disqualified it as some documents had not been provided by it, GLAS Trust said.

 

During an earlier hearing in the top court, the Bench had raised doubts over the appellate tribunal's order. The Bench observed that there was "no application of mind" by the appellate tribunal while passing the verdict. The top court had asked why Think & Learn chose to settle the INR 1.58-billion debt only with the cricket board when it had over INR 150-billion debt altogether. The top court had asked how the appellate tribunal could approve such a settlement.  End

 

Reported by Surya Tripathi

Edited by Namrata Rao

 

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