BCCI Scores Big! Byju's Faces Insolvency Fight; Edtech to Challenge?

In a major development for the Indian edtech scene, the National Company Law Tribunal (NCLT) has delivered a blow to Byju's parent company, Think and Learn Pvt Ltd. On July 16th, the NCLT admitted a plea filed by the Board of Control for Cricket in India (BCCI) to initiate a corporate insolvency resolution process (CIRP) against Think and Learn. This decision, delivered on July 16, has sparked significant controversy and reactions from the involved parties.

This move by the NCLT stems from an alleged unpaid debt of Rs 158.90 crore (excluding taxes and interest) owed by BYJU'S to the BCCI. The BCCI claims this amount is related to a sponsorship deal involving the Indian cricket team's jersey.

BYJU'S Fights Back: Settlement or Legal Battle?

While the NCLT order throws a curveball at BYJU'S, the company isn't going down without a fight. 

Sources within Byju's told TICE News, “We are trying to settle the matter. We had requested arbitration too. An insolvency proceeding for 157 crores doesn't make sense for anyone.”

"We are trying to settle the matter," the source said adding "We had requested an arbitration too... An insolvency proceeding for 157 crores doesn't make sense for anyone."

The Legal Labyrinth: Breaking Down the NCLT Order

In its order, the NCLT stated, “This Adjudicating Authority is of the considered opinion that there is no reason to deny the petition filed under section 9 of the IBC, 2016 by the Operational Creditor to initiate CIRP against the Corporate Debtor, since the existence of a debt and a default in the payment of debt is clearly established.” The tribunal further noted, “The instant Company Petition bearing CP (IB) No. 149/2023 is admitted against the Corporate Debtor and moratorium is declared in terms of Section 14 of the Code.”

The NCLT order signifies the initiation of CIRP, a time-bound legal process designed to resolve insolvency issues faced by companies. During this process, several restrictions are imposed:

• Moratorium: Legal actions against Think and Learn are put on hold.
• Asset Freeze: The company cannot transfer any assets.
• Creditor Hold: Creditors cannot seize collateral until a resolution is reached.

Understanding Section 9 of IBC

Section 9 of the Insolvency and Bankruptcy Code (IBC), 2016, empowers operational creditors to initiate insolvency proceedings against a debtor for unpaid dues exceeding a specified amount. The CIRP aims to resolve insolvency issues in a time-bound manner, either through restructuring or liquidation.

Implications of Section 14 Moratorium

The moratorium under Section 14 of the IBC imposes restrictions on legal actions against the financially troubled company. It prohibits asset transfers and forbids creditors from seizing collateral until the resolution or liquidation is decided by the tribunal.

Who's in Charge Now? The Role of the Interim Resolution Professional (IRP)

The NCLT has appointed Pankaj Srivastava as the interim resolution professional (IRP) to manage the insolvency process. The IRP essentially takes the reins of Think and Learn, with duties including:

• Managing the company's affairs and operations.
• Overseeing company assets.
• Identifying and compiling a list of creditors.
• Forming a Committee of Creditors (CoC).
• Conducting CoC meetings.
• Providing financial updates to facilitate decision-making during the CIRP.

BYJU’S Legal Struggles and Investor Relations

The case against BYJU'S parent company, filed in September last year and officially registered in November, has undergone multiple hearings at the NCLT. BCCI is pursuing a claim for a total outstanding amount of Rs 158.90 crore from BYJU'S, excluding deducted taxes and applicable interest.

A Byju's spokesperson told TICE News, “As we have always maintained, we wish to reach an amicable settlement with BCCI, and we are confident that, despite this order, a settlement can be reached. In the meantime, our lawyers are reviewing the order and will take necessary steps to protect the company’s interests.”

Arbitration Request Denied

BYJU'S sought to resolve the dispute through arbitration, but the NCLT dismissed this request, stating, “The application for referring the matter for Arbitration is not maintainable.” This decision adds to the edtech firm's mounting legal challenges with investors and lenders.

What Lies Ahead for BYJU'S?

The coming weeks will be crucial for BYJU'S. The IRP has 30 days to establish the CoC and convene its first meeting. Additionally, bi-weekly updates on the CIRP's progress must be submitted to the tribunal.

BYJU'S seems determined to reach an amicable settlement with the BCCI, but with the NCLT rejecting their request for arbitration, the legal battle could continue.

This case has significant implications for BYJU'S, not only financially but also reputationally. Whether they can reach a settlement or navigate the complexities of CIRP remains to be seen. Stay tuned to TICE News for further updates on this developing story.

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