Supreme Court sets aside NCLAT judgment on Byju’s insolvency proceedings

The Supreme Court on Wednesday set aside the decision of the National Company Law Appellate Tribunal (NCLAT) to stay the insolvency proceedings against Byju’s, the ed-tech company. A bench headed by Chief Justice DY Chandrachud, along with Justices JB Pardiwala and Manoj Misra, also reversed the NCLAT’s approval of Byju’s Rs 158.9 crore settlement with the Board of Control for Cricket in India (BCCI). The court directed the BCCI to deposit the settlement amount with Byju’s committee of creditors (CoC).

The supreme court ruled that Glas Trust Company LLC, a US-based creditor, has the legal capacity to intervene in the insolvency proceedings involving Byju’s. The bench criticized the NCLAT for using its discretionary powers to stop the insolvency proceedings, stressing that proper procedures under the Insolvency Code (CIC) should be followed.

“The NCLAT is not just a rubber stamp to approve withdrawal applications in corporate insolvency cases,” the court said. He clarified that the withdrawal application should have been filed by the Insolvency Resolution Professional (IRP) and not by Byju or other parties involved.

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The Supreme Court held that the NCLAT’s exercise of its discretionary powers was improper, stating that the inherent powers cannot be used to circumvent established legal procedures. He further directed that the Rs 158.9 crore, along with accrued interest, be placed in a separate account managed by the CoC until further orders.

Byju’s, the BCCI and Glas Trust Company can seek legal remedies as provided by law, the court noted, adding that its observations should not be made against any of the parties involved.

The Supreme Court addressed three key issues in its ruling. The US company’s right to intervene in the proceedings, the legitimacy of the NCLAT’s decision to halt the corporate insolvency resolution process (CIRP) and whether the court had adequately addressed the objections raised by Glas Trust company

The court discussed the evolution of the legal provisions for the withdrawal of bankruptcy applications after they have been admitted. He stressed that there is a detailed process for handling liquidations or withdrawals at different stages of insolvency and the use of discretionary powers by the NCLAT was no longer necessary in such cases.

Byju’s had earlier reached a Rs 158.9 crore settlement with the BCCI, which was approved by the NCLAT on August 2. However, Glas Trust Company challenged the ruling and had the Supreme Court intervene. The bank reserved its decision on September 26 and ultimately sided with the US firm.

Byju’s, which signed a “team sponsor agreement” with the BCCI in 2019, defaulted on payments to the cricket board in 2022, leading to insolvency proceedings. The ed-tech company reached an agreement with the BCCI, which the Supreme Court has now ordered to be reviewed under appropriate legal procedures.

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