NCLAT Chennai accepts Byju's settlement with BCCI, halts insolvency process

The National Company Law Appellate Tribunal (NCLAT), Chennai on Friday, August 2 allowed the appeal filed by Byju Raveendran, founder of Byju’s, against an order initiating insolvency resolution proceedings against the edtech firm..A coram of judicial member Rakesh Kumar Jain and technical member Jatindranath Swain passed the order in view of a settlement between Byju's and the Board of Control for Cricket in India (BCCI) for the repayment of around ₹158 crores owed to the BCCI in connection with cricket jersey sponsorship deals.Pertinently, it was on BCCI's plea that the National Company Law Tribunal (NCLT) Bengaluru initiated the corporate insolvency resolution process (now halted) against Byju's in June. The NCLAT today accepted the settlement between Byju's and BCCI (operational creditor) 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. "Riju Raveendran has given an undertaking this money is not coming from any credit agreement. Although the applicant (a financial creditor) is not agreeing to this, the applicant has also not brought on record any evidence that this money is from the amount disbursed to Byju's Alpha Inc or that this money is from the coffers of the Corporate Debtor (CD) ... The settlement is being arrived at before the CoC could have been formed. The source of money is not in dispute and the interest of the applicant has already been safeguarded by the NCLT in July 16 order. The first hour of justice is the hour of compromise and where the offer has been made by one of the suspended director at the behest of the CD to bury the hatchet with CD, the Court can invoke Rule 11 for the purpose of exploring a settlement. In view of these facts, the settlement is hereby approved and the appeal succeeds and the impugned order is set aside," the NCLAT ruled..The BCCI had informed the NCLAT that it had arrived at a settlement with Byju's earlier this week. Byju's founder Byju Raveendran added that the due amount would be paid to BCCI by his brother Riju (the largest shareholder of Byju's) from his personal account.In response, a US-based financial creditor raised concerns that stolen money (referring to a sum of $533 million) that was due from Byju's to financial creditors may be used to repay the BCCI.Solicitor General (SG) Tushar Mehta countered that the BCCI would never accept any tainted money. SG Mehta added today that the source of the money has been disclosed and that the repayment would be made through a banking channel. .However, Senior Advocate Mukul Rohatgi, who appeared for a financial creditor, today maintained that the source of the proposed repayment is not clear of doubt. "As I have said, the maths don't match. We are forgetting, 10,000 crore was given to them. They say remaining amount will be paid from sale of assets. Which assets? Salaries have not been paid. From where is he getting this money?" Rohatgi argued.Meanwhile, the counsel representing Byju and Riju Raveendran accused GlasTrust (financial creditor) of 'forum shopping' in trying to approach a US Court in Delaware and making references to the ongoing NCLAT proceedings. "Look at what is going on. What is transpiring in your Lordships court is becoming the subject matter in a US lis. Unacceptable, my lords," said Senior Advocate Arun Kathpalia, on behalf of Byju.Senior Advocate Puneet Bali appeared for Riju Raveendran and added:"This money came to me in 2015-16. It hasn't earned interest. I have paid 1,050 crore as tax on this money. I am thankful to them (Glas Trust) they have gone to the US court to say this is my money. So, once this is my money, it is not part of the 533 million (amount due to financial creditors). So what's the problem? ... I have a serious problem with this application (Glas Trust's). This is forum shopping.".Responding to a query by the NCLAT on a related aspect, Rohatgi countered:"I have every right to go to the US court. IBC proceedings are not recovery proceedings. They are meant for revival. That is the foundation.""We might argue, we might go before the Supreme Court and say it is for revival but in reality, it is for recovery only. What else? Financial creditors have their own remedy. Who has stopped you? Rule 11 gives me power to use discretion before CoC is formed. So I'll choose whether to use or not," the NCLAT Bench observed."My argument is, don't use it," Rohatgi urged. "There is a procedure under IBC. These are not recovery proceedings," added Senior Advocate Krishnendu Datta on behalf of GlasTrust."I know that. Had the CoC been constituted it would have been a different matter," the NCLAT Bench observed. The appellate tribunal proceeded to indicate that it did not wish to keep the matter pending for longer. "This is unnecessary hyping the matter. It is simple matter of settlement and I would have passed order in two minutes ... I am a little disturbed because the same thing is being argued. It is like any other case. There is nothing special about this," the NCLAT said, before pronouncing its decision today. .The NCLAT accepting the settlement between BCCI and Byju's means that the insolvency proceedings against Think and Learn (parent company of Byju's) will be stopped. Hence, the Company of Creditors that was to be formed under the Insolvency and Bankruptcy Code (IBC) will not be formed and the firm will come out of the control of the Interim Resolution Professional (IRP) appointed by the NCLT Bengaluru last month..Raveendran had claimed before the NCLAT that his firm is solvent and that he is willing to pay salaries to his employees and pay off his debts. In the event of a default, his creditors will need to initiate fresh proceedings under the IBC against the firm..Senior Advocates Arun Kathpalia, Puneet Bali and Dhyan Chinnappa, along with Advocates Rishabh Gupta, Zulfiquar Memon, Kunal Vajani, Waseem Pangarkar, Nadiya Sarguroh, Avishkar Singhvi, Swapnil Srivastava, Yashowardhan Dixit, Gargi Patil, Aditi Tiwari, Allan David, Jayesh Srivastava, Yashita Bharadwaj for MZM Legal LLP appeared for Byju and Riju Raveendran.Solicitor General Tushar Mehta along-with advocates Adity Chaudhury, Bhavya Mohan (Partners) and Ann Pereira, Anjali Kutiyal (Associates) of Argus Partners appeared for BCCI.Senior Advocates Mukul Rohatgi, Arvindh Pandian and Krishnendu Datta and Advocates Prateek Kumar, Nikhilesh Rao, Thriyambak Kannan, Raveena Rai, Avinash Balakrishna, Tejas Shetty and Abhishek P appeared for the impleading applicant GLAS Trust Company LLC..[Read live coverage of hearing]