However, on August 14, the The Supreme Court intervened by suspending the NCLAT order that had Approved the conciliation agreement between Think & Learn Pvt Ltd, the parent company of Byju’s, and the Board of Control for Cricket in India (Bank of Canada International Trade Commission (BCCI)), adding to the troubles of the beleaguered education technology company.
The apex court on Thursday rejected pleas by Byju’s and BCCI to stay a meeting of the Committee of Creditors (CoC) in their ongoing insolvency case. The court will hear the matter again on August 27.
The BCCI case is among several legal disputes that Byju’s is currently facing, part of a broader crisis that has severely affected its operations and financial stability.
Byju’s dispute with BCCI
On August 2, the Chennai bench of NCLAT approved Byju’s founders’ settlement of Rs 158 crore owed to BCCI, helping the edtech firm avoid bankruptcy.
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The issue stems from the termination of Byju’s title sponsorship deal with BCCI. Byju’s had signed a jersey sponsorship deal in March 2019 for three years, which was later extended for another year. Payments were made till September 2022. However, the controversy centres on unpaid dues for the period from October 2022 to March 2023. The cricket body, seeking to recover these pending payments, has approached the National Company Law Tribunal (NCLT) to initiate bankruptcy proceedings against Byju’s.
Byju Raveendran’s brother Riju Ravindran, also the largest shareholder in the company, is using his personal funds to settle the dispute with BCCI. However, the resolution suffered a setback when Glas Trust Company, another creditor, challenged the deal.
US lenders and B-term loan dispute
Byju’s is currently locked in a legal dispute with its US lenders, represented by Glas Trust Company. The dispute centres on a $1.2 billion term loan that Byju’s obtained from these lenders and allegations of financial mismanagement by Byju Raveendran.
The Glas Trust Company has objected to Riju Ravindran’s payment to BCCI. The lenders have also filed a bankruptcy petition in the US against a Byju’s subsidiary, accusing Byju Raveendran of siphoning off more than $500 million of the $1.2 billion they had lent.
The lenders consider the payment to BCCI questionable and have called the proposed deal “tainted.” The US lenders claim that Byju’s is using their funds to pay BCCI, but the edtech firm has refuted the allegations.
On August 8, the Delaware Bankruptcy Court dismissed a petition by Glas Trust Company, representing the US lenders, to block the settlement agreement between Byju’s and BCCI. After Glas Trust Company approached the Supreme Court, the court stayed the NCLAT order. The court also ordered BCCI to keep the settlement amount in a separate escrow account.
Glas Trust Company has also filed an appeal before the NCLAT, which is scheduled to be heard on September 13.
ED Research
India’s Enforcement Directorate (ED) is investigating Byju’s and its founder for alleged violations of the Foreign Exchange Management Act (FEMA) involving Rs 9,362.35 crore. The probe is focusing on large financial transactions by the company, including foreign investments and remittances.
In April 2023, the ED conducted searches at Byju’s offices and Raveendran’s residence and seized documents related to foreign direct investments (FDI) and overseas direct investments (ODI) of the company.
The agency’s investigation led to the issuance of show-cause notices to Byju’s and its founder on November 21, 2023.
Byju’s has denied any wrongdoing and instead claimed that it has complied with all FEMA norms and that the CEO’s concerns are primarily related to a delayed audit for fiscal 2022. Byju’s also said that the foreign direct investment of about Rs 8,000 crore was made after due compliance and that any discrepancies are due to delays in legal documents.
Battle with investors
The current dispute between Byju’s and its investors centres on a contentious rights issue that has led to a legal dispute. These investors are now alleging governance lapses and mismanagement at the company.
Byju’s had done a rights issue of $200 million at a 99% discount. from its peak valuation of $22 billion, prompting objections from investors including Peak XV Partners and Prosus.
On April 23, these investors complained to the NCLT that Byju’s had violated the court’s order by using the rights issue proceeds and issuing shares to subscribers without increasing its authorised share capital.
The NCLT, in an order dated June 12, had directed Byju’s to maintain the status quo on its shareholding, putting its controversial rights issue on hold. It had directed the company to stop its second rights issue and put all the funds from the first rights issue into an escrow account. It had also asked the company not to use the cash that had been raised so far through the second rights issue.
NCLT had also sought information from Byju’s about the recipients of the shares issued during the first rights issue.
Last year, Prosus’ representative on Byju’s board resigned, along with other shareholders such as Peak XV Partners and the Chan Zuckerberg Initiative.
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