In
a significant setback for edtech giant Byju’s, the Supreme Court has annulled
the National Company Law Appellate Tribunal (NCLAT) ruling that sanctioned a
settlement of Rs 158 crore between Byju’s (Think and Learn Pvt Ltd) and the
Board of Control for Cricket in India (BCCI) on October 23.
This
ruling nullifies the NCLAT’s earlier decision that had halted insolvency
proceedings against Byju’s following its agreement with the BCCI. The Supreme
Court found that the NCLAT had not adhered to the procedural norms established
in the Insolvency and Bankruptcy Code (IBC), thus wrongly approving the
settlement.
As a result of this
judgement, the Rs 158 crore that the BCCI had deposited in an escrow account
will now be redirected to an escrow account managed by the Committee of
Creditors (CoC). The ruling was delivered by a bench led by Chief Justice of
India (CJI) DY Chandrachud, with Justices JB Pardiwala and Manoj Misra. Senior
advocates Shyam Divan and Kapil Sibal represented Glas Trust, while Abhishek
Manu Singhvi appeared for Byju’s. The BCCI was represented by Solicitor General
Tushar Mehta.
The court criticised the
NCLAT for prematurely concluding the Corporate Insolvency Resolution Process
(CIRP), stating that it had improperly invoked its inherent powers under Rule
11 of the NCLAT Rules, 2016, to approve the withdrawal of the insolvency
application. The judgement noted, “The NCLAT erred in allowing the withdrawal
of the insolvency application by invoking its inherent powers under Rule 11 of
the NCLAT Rules 2016. When there is a specific procedure provided for the
withdrawal of insolvency applications, the NCLAT cannot invoke its inherent
powers.”
The court also clarified
that any application for withdrawal must be made through the Interim Resolution
Professional (IRP), not directly by the parties involved. It asserted that once
a CIRP is initiated, the IRP assumes control of the debtor’s affairs, and any
withdrawal must be processed through them. The National Company Law Tribunal
(NCLT), which oversees insolvency cases, is not merely a “post office” for
automatic approvals, and the NCLAT exceeded its authority by approving the
settlement between Byju’s and BCCI.
Furthermore, the court
highlighted the absence of a formal withdrawal application in this case. Instead
of approving the settlement, the NCLAT should have paused the formation of the
CoC and directed the parties to comply with the established legal procedure
under Section 12A of the IBC, which governs insolvency application withdrawals.
The CJI also drew
attention to ongoing investigations by various authorities, including those
initiated by the Delaware court and India’s Enforcement Directorate. With the
settlement annulled, the insolvency proceedings against Byju’s will now
recommence, prolonging the company’s legal challenges.