The Supreme Court on Wednesday allowed the appeal filed by US-based financial creditor Glas Trust challenging the National Company Law Appellate Tribunal (NCLAT) decision to halt insolvency proceedings initiated against Think & Learn, the parent company of Byju's [Glas Trust Company LLC v. Byju Raveendran and ors].
A Bench of Chief Justice of India (CJI) DY Chandrachud and Justices JB Pardiwala and Manoj Misra held.
"There was no formal application made for withdrawal, the first respondent who was a former director of the corporate debtor had moved NCLAT directly. Despite these grave deviations, NCLAT still approved the settlement. We hold that recourse to Rule 11 of NCLAT Rules was not warranted and exercise of inherent powers cannot be done to subjugate legal process and the NCLAT should have stayed the composition of Committee of Creditors (CoC) instead. Thus we allow the appeal and set aside NCLAT judgment of August 2, 2024."
The Court directed that the amount of ₹158 crore maintained in a separate escrow account pursuant to the stay of the NCLAT judgment, will have to be deposited into the escrow account of the Committee of Creditors.
It said that the former management of the Byju's must have submitted the withdrawal application through the Resolution Professional and not on their own.
NCLAT in its appellate jurisdiction could not have allowed the settlement and it ought to have directed the parties to approach the NCLT to do the same, the Court said. It added,
"NCLT cannot be considered a post office who will stamp such withdrawal applications being moved by the IRP. It was never fathomed that withdrawal would be a unilateral process. When withdrawal is sought before CoC is constituted, NCLT must hear all parties...provision for appeal stipulates that aggrieved party can approach Supreme Court from NCLAT or NCLAT from NCLT."
Byju's was admitted to the corporate insolvency resolution process (CIRP) in July after the National Company Law Tribunal (NCLT) in Bengaluru allowed the insolvency plea filed by Board of Control for Cricket in India (BCCI) over a default of ₹ 158 crore.
The Tribunal had appointed Pankaj Srivastava as the Interim Resolution Professional (IRP).
The NCLAT then closed the insolvency proceedings and accepted a settlement between Byju's and BCCI after recording an undertaking that the repayment is being personally funded by Riju Raveendran (brother by Byju Raveendran) and not taken from money that should go to financial creditors.
On August 14, the apex court had stayed the NCLAT order which had halted the CIRP.
In September, while reserving its judgment, the apex court ordered the interim resolution professional to maintain status quo for the time being and not hold any meeting of committee of creditors (CoC). The Court had also pondered whether the NCLAT had applied its mind while halting the insolvency process by accepting the settlement.
Solicitor General Tushar Mehta appeared for the BCCI. He was assisted by Advocate Kanu Agrawal and briefed by Argus Partners.
Senior Advocate Kapil Sibal appeared for Glas Trust.
Senior Advocates Shyam Divan along with Advocates Prateek Kumar, Raveena Rai, Smriti Nair, Nishant Sharma and Anshula Laroiya from law firm Khaitan & Co also appeared for Glas Trust.
Senior Advocates Abhishek Manu Singhvi and Neeraj Kishan Kaul, along with Advocates Zulfiquar Memon, Waseem Pangarkar, Nadiya Sarguroh, Swapnil Srivastava from MZM Legal LLP appeared for Byju's and Byju Raveendran.