[Update] NCLT Admits BCCI Plea Seeking Insolvency Proceeding Against BYJU’S; Startup To Contest

Byju Raveendran Alleged To Have Asked US Ally To Flee Before Testimony

SUMMARY

Last year, the BCCI filed a petition with the NCLT against BYJU’S, alleging that the edtech startup had not cleared dues worth INR 158.9 Cr

The tribunal has appointed Pankaj Shrivastava as interim resolution professional and directed him to issue a public notice to invite claims from all creditors

The NCLT rejected BYJU’S objections to BCCI’s plea, saying that email communications between the two parties showed that the sponsorship arrangement was still in force till September 15, 2023 and that BYJU’S continued to avail all rights of being a sponsor

Update | July 17, 1:53 PM

Caught in a whirlwind of regulatory troubles, beleaguered edtech startup BYJU’S is now seeking to contest the recently admitted insolvency proceedings. Sources told Inc42 that the startup will file an appeal against the insolvency plea admitted by the NCLT within this week. Reuters was the first to report the development.

The Bengaluru bench of the National Company Law Tribunal (NCLT) has admitted the Board of Control for Cricket in India’s (BCCI) petition seeking insolvency proceedings against edtech giant BYJU’S over alleged unpaid dues of about INR 158.9 Cr.

The tribunal has appointed Pankaj Srivastava as interim resolution professional for BYJU’S insolvency process and directed him to issue a public notice to invite claims from all creditors. As per NCLT’s ruling, Srivastava will run the company’s operations until a Committee of Creditors (COC) is constituted.

“… the existence of a debt and a default in the payment of debt is clearly established,” observed the division bench of judicial member K Biswal and technical member Manoj Kumar Dubey in its order dated July 16.

The order comes months after the BCCI in September 2023 dragged BYJU’S to the NCLT, seeking initiation of corporate insolvency resolution process against the edtech company under section 9 of Insolvency & Bankruptcy Code, 2016 over the dispute around the sponsorship rights of the Indian cricket teams’ jerseys.

The BCCI alleged at the time that BYJU’S had not cleared dues worth more than INR 158 Cr.

The dispute dates back to 2019 when BYJU’S assumed the sponsorship of the Indian cricket team from Chinese smartphone maker OPPO – a commitment that was supposed to last till March 2022.

At the end of this period, BYJU’S sought an extension of the sponsorship deal for another year. However, the edtech giant unceremoniously exited the sponsorship deal with the BCCI around December 2022, citing financial and regulatory challenges.

In January, lawyers representing BYJU’S contended before the NCLT that the insolvency resolution proceedings against it cannot continue till the matter is decided by an arbitrator.

They argued that the BCCI did not render any service after the culmination of the contract between the two parties. Thus, the BCCI’s claims of pending dues to the tune of INR 158 Cr from BYJU’S cannot be considered as an operational credit, Inc42 reported earlier.

However, the NCLT has rejected BYJU’S objections to BCCI’s plea, saying that email communications between the two parties showed that the sponsorship arrangement and related services were still in force till September 15, 2023 and that BYJU’S continued to avail all rights of being a sponsor.

“Considering the facts as stated above, is naïve to assume and argue on the part of the Corporate Debtor that for so many services the Corporate Debtor were allowed to continue as the Sponsor and also availed all the rights/services, without having any liability towards the Operational Creditor for the payment of requisite fees for the same,” the order said.

Meanwhile, Moneycontrol, citing sources, reported that BYJU’S may try to get a stay on the NCLT order and attempt to settle its dispute with the BCCI outside the court.

The development comes at a time when BYJU’S is facing setbacks on multiple fronts from declining revenues to funding vacuum and consequent mass layoffs to legal trouble with the NCLT and a probe by the Enforcement Directorate.

Earlier this month, the NCLT warned BYJU’S that it might face an audit if the edtech company fails to clear overdue salaries of its employees.

Bengaluru-based law firm Canvas Legal has issued the demand notice of over INR 2.3 Cr on behalf of 62 former employees of BYJU’S, warning that it will initiate insolvency proceedings against the startup if it fails to clear the unpaid dues within 10 days of receiving the notice.

Earlier today, Inc42 reported that BYJU’S has been locked out of over 100 of its tuition centres over alleged unpaid rent and electricity bills.