Supreme Court Overrules NCLAT Decision in Byju’s Insolvency Case

The Supreme Court has overturned the National Company Law Appellate Tribunal’s (NCLAT) ruling that halted the insolvency proceedings against Byju’s. The apex court, headed by Chief Justice D.Y. Chandrachud, emphasized that Glas Trust Company, a US-based creditor, has the legal right to intervene in the insolvency proceedings. Byju’s had faced financial difficulties leading to corporate insolvency filings, but the NCLAT had previously allowed a settlement between the ed-tech giant and the Board of Control for Cricket in India (BCCI), which the Supreme Court has now revoked.

Byju’s, once hailed as a key player in India's booming ed-tech sector, found itself in insolvency trouble after failing to meet its payment obligations to several stakeholders, including the BCCI. The company had signed a significant sponsorship deal with the cricket board in 2019 but defaulted on its payments in 2022, resulting in financial disputes. After negotiations, Byju’s reached a settlement of Rs 158.9 crore with the BCCI, which was approved by the NCLAT. However, Glas Trust Company, a creditor holding claims against Byju’s, contested the settlement, leading the case to the Supreme Court.

The Supreme Court criticized the NCLAT’s use of discretionary powers, noting that the insolvency withdrawal process requires strict adherence to the Insolvency and Bankruptcy Code (IBC) procedures. The ruling clarified that any application for the withdrawal of insolvency proceedings should come from the appointed Insolvency Resolution Professional (IRP), not directly from the corporate debtor, as in this case.

The court further directed that the Rs 158.9 crore settlement, along with any accumulated interest, be placed in a separate account managed by Byju's Committee of Creditors (CoC). This decision ensures that the creditors' interests are prioritized in the ongoing insolvency resolution process, as mandated by the IBC.

Byju’s legal battle has drawn significant attention, as the company was once regarded as a cornerstone of the Indian ed-tech industry. The legal confrontation has raised questions about the company’s financial health, governance, and the long-term sustainability of its business model. The Supreme Court’s ruling is expected to further complicate Byju’s efforts to stabilize its financial standing, as it now faces the challenge of adhering to legal procedures while simultaneously negotiating with multiple creditors and stakeholders.

This case also sheds light on the growing role of foreign creditors like Glas Trust Company in Indian insolvency cases. Glas Trust’s involvement, representing foreign debt, underscores the increasing globalization of corporate finance and the complexities it brings to legal and insolvency proceedings in India.