New SC overrules NCLAT decision in Byju’s case

The Supreme Court on Wednesday set aside a decision of the National Company Law Appellate Tribunal (NCLAT) allowing a Rs 158 crore settlement between ed Byju’s technology firm and the Board of Board of 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 that the application for withdrawal from the Corporate Insolvency Resolution Process (CIRP) should have been moved through the Interim Resolution Professional (IRP) and should have been placed before the National Company Law Tribunal (NCLT) for approval.

“In the first place, no formal application was made to seek withdrawal of the CIRP. The settlement agreement was registered and approved by the NCLAT based on the submissions and assurances of the counsel before it and the affidavits/undertakings filed by the parties.Furthermore, the first respondent (Byju Raveendran), who is a former director of the corporate debtor (ed technology company), did not move the application through the ‘IRP and instead approached the NCLAT directly,” Chief Justice Chandrachud, author of the judgment. he pointed out

Even the request for approval of the ₹158 crore settlement was moved before the NCLAT during the appellate proceedings, instead of coming before the NCLT.

“Despite these gross deviations, the NCLAT still proceeded to approve the agreement and set aside the CIRP invoking its inherent power under Rule 11 of the NCLAT Rules,” the Supreme Court noted.

The judgment upheld the locus standi of US-based creditor Glas Trust Company LLC which had filed the appeal against the NCLAT decision.

The apex court, however, said it would not be appropriate for it to rule on the objections raised by Glas on the merits of the settlement agreement.

“The issues raised are the subject of various litigations in various fora, including the Delaware Court, and investigations by various authorities, including the Enforcement Directorate, which are pending,” explained Chief Justice Chandrachud.

Considering that a Committee of Creditors (CoC) was constituted during the pendency of the supreme court proceedings, the court gave liberty to the parties to invoke their remedies or to request the withdrawal or liquidation of the claims of in accordance with the legal framework that regulates the withdrawal of CIRP. .

“Nothing in this judgment should be interpreted as a finding about the conduct of any of the parties or other parties involved in the insolvency proceedings,” the court emphasized.

Separate escrow account

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

The CoC was directed to maintain this amount in an escrow account pending further developments and follow the further directions of the NCLT.

The NCLAT had on August 2 granted relief to the beleaguered ed-tech firm by quashing the insolvency proceedings after approving a Rs 158.9 crore dues settlement with the BCCI. Byju’s had signed a team sponsorship deal with the BCCI in 2019.