NCLAT approves Byju's settlement with BCCI, sets aside insolvency plea

New Delhi: In a major relief for the embattled edtech major, the insolvency appellate tribunal on Friday approved the Rs 158.9 crore dues settlement with BCCI and set aside insolvency proceedings against Byju's, a move that will effectively put Byju Raveendran back in control of the firm.

The company, in a statement, termed the order a "major victory" for Byju's and its founders and said it was clear during the proceedings that the promoters had "gone to great lengths and made immense personal sacrifices to keep their company running.”

The latest order of the National Company Law Appellate Tribunal (NCLAT) assumes significance as it brings the edtech company out of the corporate insolvency resolution process, and places the promoters back in control of the Board.

"In view of the undertaking given and affidavit filed, the settlement between the parties is hereby approved and as a result, the appeal succeeds and impugned order (passed by the NCLT) is set aside," said a two-member Chennai bench in its order in the open court.

The NCLAT observed that the settlement is being arrived at between the parties before the Committee of Creditors (CoC) could have been constituted and that the source of the payment being made "is not in dispute" nor related to the foreign funds as alleged by the US-based creditors.

The NCLAT order, however, has a caveat: Any failure to make payments on the specific dates mentioned in the undertaking would automatically lead to a revival of the insolvency proceedings against Byju's.

The tribunal further said the money was paid by Riju Raveendran (brother of Byju Raveendran) through the sale of his shares, taxes have been duly paid and payment is coming through proper banking channels.

As per the undertaking, Riju Raveendran made a payment of Rs 50 crore on July 31, 2024, against the outstanding dues owed by Byju's to the Board of Control for Cricket in India (BCCI). Another Rs 25 crore will be submitted on Friday, and the remaining Rs 83 crore on August 9 through RTGS.

"...the impugned order will be set aside with the caveat that in case there is a breach in the undertaking given, the order dated July 16, 2024, shall automatically revive...," the NCLAT order stated.

In its order, the appellate tribunal observed that "as it is generally said that the first hour of justice is the hour of compromise..." 

The appellate tribunal also dismissed the allegation of 'round-tripping' leveled by Byju's US-based lenders, saying they failed to provide any evidence in support of their claims.

The NCLAT also noted the submissions of Solicitor General of India Tushar Mehta (appearing on behalf of BCCI), who said he has no objection to receiving money from Riju if it is clean and has come from proper channels.

It may be recalled that on July 16, the Bengaluru bench of the National Company Law Tribunal (NCLT) had admitted Think and Learn to the insolvency resolution process, on a plea filed by BCCI over default in payment of outstanding dues of almost Rs 158.9 crore.

While suspending the board of the edtech firm, the NCLT has appointed an interim resolution professional, to run the operations of the company, suspended the company's board of directors and brought it under moratorium by freezing its assets.

Welcoming the NCLAT order, founder Byju Raveendran, said, "Today's NCLAT order is not just a legal victory, but a testament to the heroic efforts made by our BYJU'S family in the last two years.”

"Our founding team members have poured their hearts and souls, not to mention their entire savings, into this dream, often at great personal cost. Every BYJU-ite has demonstrated extraordinary resilience, working tirelessly through unprecedented challenges. Their collective sacrifice humbles me, and I am deeply grateful to each one of them," he said.

"We have nurtured BYJU'S for two decades, and we are committed to its mission of imparting high-quality education to students everywhere. You can never defeat a team that never gives up." 

It is pertinent to mention here that BCCI and Byju's had entered into a 'Team Sponsor Agreement' on July 25, 2019.

According to this agreement, Byju's got the exclusive right to display its trademark/brand name on the kit of the Indian cricket team, place advertisements during the telecast of cricket series, and hospitality and non-hospitality tickets for every ticketed match organised by BCCI, according to the NCLT order.

"As consideration, the Corporate Debtor (Byju's) was required to pay a fee to the Operational Creditor (BCCI)," it had said.

"The Corporate Debtor was the Sponsor of the Indian cricket team as per the above arrangements and availed the Services for a period up until March 31, 2023." 

After March 31, 2022, Byju's made payment in full only against one invoice for the India-South Africa cricket series held in June 2022, amounting to Rs 25.35 crore but failed to pay for subsequent invoices.

A bank guarantee of Rs 143 crore was encashed but that was not sufficient to cover the entire amount, it said, adding the sponsorship fee for series/tours, including that of South Africa, Australia, Sri Lanka and New Zealand, Asia Cup and ICC T20 between August 2022 to January 2023, amounting to Rs 158.9 crore remain unpaid.

A storied edtech startup, Byju's was once valued at USD 22 billion but the reopening of schools after the easing of pandemic restrictions led to its unraveling. BlackRock recently slashed its valuation of USD 1 billion.

The company's troubles began when it missed financial reporting deadlines two years ago and fell short of revenue projections by more than 50 per cent.

In February, a group of investors in Byju's parent company Think & Lean (T&L), including Prosus and Peak XV, voted to remove Raveendran as CEO during an extraordinary general meeting (EGM), citing allegations of "mismanagement and failures.” Raveendran had denied all allegations.