The Supreme Court on Wednesday (August 14, 2024) stayed the operation of a National Company Law Appellate Tribunal (NCLAT) decision which had allowed debt-ridden ed-tech firm Byju’s to pay a settlement amount of ₹158 crore to the Board of Control for Cricket in India (BCCI).
A three-judge Bench headed by Chief Justice of India D.Y. Chandrachud directed the BCCI to maintain the amount in a separate account.
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The order followed an appeal filed by the U.S.-based lender Glas Trust Company LLC, a financial creditor which said it had a claim of ₹8,500 crore over the ed-tech firm.
The Bench was urged by the BCCI and Byju’s CEO Byju Raveendran, who was represented by senior advocate A.M. Singhvi, to not stay the NCLAT order without hearing them in detail. Solicitor General Tushar Mehta said the Board was “not going to run away” with the money.
“Has a lookout notice been issued against you? Is it true that both the brothers (Byju and Riju Raveendran) are outside India? Is it true that 3,000 claims have been lodged before the Interim Resolution Professional (IRP) as of now?” the Chief Justice asked Mr. Singhvi in justification of its stay order.
The NCLAT decision allowing the settlement, on August 2, was based on the reasoning that the BCCI would not accept any tainted money. The amount of ₹158 crore was offered by Mr. Riju Raveendran. It was generated in India, for which income tax was paid. The money was received through banking channels.
Glas Trust Company, represented by senior advocate Shyam Divan, said the “drill of the law” was not followed in the settlement between Byju’s and the BCCI. The U.S. lender said, as a major financial creditor, it should have priority in repayments.
Mr. Singhvi described Glas Trust Company’s appeal as a show of ego.
“Apart from an ego, he (Glas Trust Company) has a claim of ₹8,500 crore,” the Chief Justice reacted.
The court issued notice to Mr. Byju Raveendran, the BCCI, and Think and Learn Private Limited, which is Mr. Byju Raveendran’s company. The case was listed for hearing on August 23.
During the hearing, Mr. Divan said the settlement was contrary to the law. He invoked Section 12A of the Insolvency and Bankruptcy Code, and Regulation 30A of the Insolvency Resolution Process for Corporate Persons Regulations.
The senior lawyer said the law required a settlement to be presented before the adjudicating authority, which was the National Company Law Tribunal (NCLT), and not the appellate tribunal (NCLAT).
Section 12A empowered the NCLT to allow settlement after the constitution of the Committee of Creditors (CoC), and only with the approval of 90% voting share of the CoC.
“This is a sine qua non (a mandatory requirement),” Mr. Divan underscored.
Regulation 30A(1)(a) permitted settlement before the constitution of the CoC, but the application had to be through the IRP.
“The drill of the regulated, statutory procedure has to be followed. The NCLAT cannot bypass statute by relying on its inherent powers and ignore the mandate of the Parliament… You cannot invoke the inherent powers of the NCLAT to trump a drill prescribed under the statute and act contrary to the law… The mandate says that you can go for a settlement, but you have to present it before the adjudicating authority, the NCLT,” Mr. Divan submitted.
