The Supreme Court on Wednesday set aside a decision of the National Company Law Appellate Tribunal (NCLAT) allowing a ₹158 crore settlement between ed tech firm Byju’s and the Board of Control for Cricket in India (BCCI).
A three-judge Bench headed by Chief Justice of India DY Chandrachud said there were “grave deviations” in the procedure adopted for bringing the case to the NCLAT itself.
The court said the application for withdrawal of the Corporate Insolvency Resolution Process (CIRP) should have been moved through the Interim Resolution Professional (IRP) and placed before the National Company Law Tribunal (NCLT) for approval.
“First and foremost, there was no formal application instituted to seek the withdrawal of the CIRP. The settlement agreement was taken on record and approved by the NCLAT based on the submissions and assurances of the counsel before it and the affidavits/undertakings filed by the parties. Further, the first respondent (Byju Raveendran), who is a former director of the corporate debtor (ed tech firm), did not move the application through the IRP and instead approached the NCLAT directly,” Chief Justice Chandrachud, who authored the judgment, pointed out.
Even the request to approve the ₹158-crore settlement was moved before the NCLAT during appellate proceedings, instead of being placed before the NCLT.
“Despite these grave deviations, the NCLAT still proceeded with approving the settlement and setting aside the CIRP by invoking its inherent power under Rule 11 of the NCLAT Rules,” the Supreme Court highlighted.
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 adjudicate on the objections raised by Glas on the merits of the settlement agreement.
“The issues raised are the subject matter of several litigations in different fora, including the Delaware Court and investigation by various authorities, including the Enforcement Directorate, which are pending,” Chief Justice Chandrachud explained.
Noting that a Committee of Creditors (CoC) was constituted during the pendency of the apex court proceedings, the Bench gave the parties liberty to invoke their remedies or to seek a withdrawal or settlement of claims in compliance with the legal framework governing the withdrawal of CIRP.
“Nothing in this judgment should be construed as a finding on the conduct of any of the parties or other stakeholders involved in the insolvency proceedings,” the court underscored.
Separate escrow account
The court directed the ₹158 crore settlement amount along with accrued interest, maintained in a separate escrow account on the basis of its August 14 order, to be deposited with the CoC.
The CoC was directed to maintain this amount in an escrow account until further developments and to abide by any further directions of the NCLT.
The NCLAT, on August 2, had granted relief to the embattled ed-tech firm by setting aside the insolvency proceedings after approving a ₹158.9 crore dues settlement with the BCCI. Byju’s had entered into a Team Sponsor Agreement with the BCCI in 2019.
