SC junks Byju’s, BCCI settlement; paves way for insolvency of edtech firm
Founder Byju Raveendran is increasingly looking like losing control of his once-unicorn startup Byju’s. In a major setback to the edtech company, the Supreme Court on 23 October in its verdict has set aside the National Company Law Appellate Tribunal (NCLAT)’s order that had approved a Rs 158 crore settlement between Byju’s (Think and Learn Pvt Ltd) and the Board of Control for Cricket in India (BCCI). This effectively means that the apex court has given a go-ahead to restart the corporate insolvency resolution process, which was halted by the NCLAT order.
A three-judge bench of the top court, led by the Chief Justice of India (CJI) D Y Chandrachud, directed that the Rs 158 crore amount maintained in a separate escrow account will now have to be deposited into the escrow account of the committee of Creditors (CoC). The bench has also asked Byju’s and other parties to approach the CoC to pursue their remedies.
Setting aside the previous ruling of the NCLAT, which had closed the insolvency proceedings against the Byju’s after it settled with BCCI, the apex court held that the NCLAT had violated the proper procedures outlined in the Insolvency and Bankruptcy Code (IBC) and the settlement between the two parties was wrongly approved.
The apex court in its judgement criticised the NCLAT for prematurely concluding the Corporate Insolvency Resolution Process (CIRP). “The NCLAT had wrongly invoked its inherent powers under Rule 11 of the NCLAT Rules, 2016, to approve the withdrawal of the insolvency case,” the apex court said.
The top court observed that the NCLAT erred in allowing the withdrawal of the insolvency application. When there is a specific procedure provided for the withdrawal of insolvency applications, the NCLAT cannot invoke its inherent powers.
The application for withdrawal can only be submitted through the Interim Resolution Professional (IRP) and not by the parties themselves, as was done in this case, it added.
The Court made it clear that once a Corporate Insolvency Resolution Process (CIRP) is admitted, the IRP takes control of the debtor’s affairs, and any withdrawal of the application must go through the IRP.
Also See: NCLAT gives nod to Byju’s one-time settlement with BCCI
