Byju’s failed defence against BCCI insolvency application

As the Bengaluru bench of the NCLT admitted an insolvency petition filed by Board of Control for Cricket in India (BCCI) against edtech company Byju’s. The petition is a result of Byju’s failing to pay a sum of Rs 158 crore for a deal related to sponsorship of Indian cricket team.

While the Raveendran Byju promoted company may move the National Company Law Appellate Tribunal (NCLA) against the NCLT order, we look at the major points of argument put forth by the Bengaluru-based edtech firm in the NCLT against the BCCI petition.

Absence of operational debt: According to Byju’s, a mere grant of rights to it pertaining to a sponsorship cannot be said to be the provision of a ‘service’ from the BCCI to Byju’s. No service was ever provided by the BCCI which was not a ‘service provider’ and the respondent (Byju’s) is not a ‘service receiver’ or recipient of any service from the BCCI.

It argues that under the Section 5(20) & (21) of the Insolvency and Bankruptcy Code (IBC), an ‘operational creditor’ can file an application seeking initiation of the CIRP process against a corporate debtor on account of non-payment of any ‘operational debt’. On account of the reciprocal rights and obligations between the parties, BCCI merely granted certain ‘Rights’ and no ‘services’ were ever provided to BYJU’S under the Agreement. Since no service has been provided by the BCCI, it cannot be termed as a service provider and further does not fall under the definition of “Operational Creditor.”

No contractual Arrangement between the parties: Byju’s argued that soon after entering into the Agreement, the COVID-19 pandemic outbreak was announced and due to which it lost the ability to monetize on the rights granted under the Agreement and suffered heavy commercial and business loss.

Thus, due to inability to fully benefit from the Agreement, the edtech firm through email 23 November 2021, requested BCCI for an extension of the Agreement (which was due to expire on 31 March 2022 till 2025. The parties began negotiating the terms of the Draft Amendment Agreement and obligation of payment of right fee. In this regard there were multiple rounds of discussions, in which the respondent proposed extensions and various deals several times all of which was denied by the Operational Creditor.

Therefore, the corporate debtor argued that the proposed extension agreement was never finalised and consequently never executed. Therefore, it is an admitted position that as of 31 March 2022 and till date there exists no formal written agreement between the parties.

Pre-existing Dispute between the parties: Byju’s contend that the since the negotiations of the Sponsorship was still in the process and the same was contended by the Respondents in reply to the Demand Notice dated 18 July 2023, despite the existence of a dispute, BCCI has filed the insolvency application.

Byju’s submitted in NCLT that it raised disputes with respect to (i) no contractual basis for the alleged claim, (ii) the alleged claim not being an ‘Operational Claim’ as per the provisions of the code. Despite the existence of a dispute on these aspects, the present Application (which is not maintainable) has been filed.

Payment of TDS does not amount to an admission of debt: Byju’s argued that BCCI has sought to portray that the Edtech firm had acknowledged the debt by relying on TDS deposited by it. In this regards it submitted that form 26AS merely provides a record that TDS was deducted and deposited by the Respondent. In this regard reliance is placed on the various judgements of NCLAT in Prayag Polytech Pvt Ltd v. Gem Botteries Pvt Ltd in CA(AT)(Ins.) No. 713/2019, Gajendra Investment v Bleu Noir in CA(AT)(Ins.) No.990/2021 and the case of PM Storage Private Limitedv. Goouksheer Farm Fresh Private Limited CA(AT)(Ins.) No. 615/2020, wherein it was held that the deposit of TDS cannot be construed as an acknowledgement of liability.

Therefore, it contended that the petition is non-maintainable before the Tribunal on account of being ultra vires to the Memorandum Documents of BCCI itself.

Also See: Insolvency court admits bankruptcy petition against Byju’s