BENGALURU: In a significant ruling that impacts the corporate landscape of India, the National Company Law Appellate Tribunal (NCLAT) has dismissed attempts by Riju Ravindran, the brother of Byju's founder Byju Reveendran, along with the Board of Control for Cricket in India (BCCI), to withdraw insolvency proceedings against the edtech giant without the requisite approval from its creditors. This decision serves to reinforce the authority and significance of the committee of creditors (CoC) in the ongoing corporate insolvency case involving Byju's.

The NCLAT's ruling upheld an earlier verdict issued by the Bengaluru bench of the National Company Law Tribunal (NCLT), which had also denied a request for immediate approval of an out-of-court settlement that had been proposed between the BCCI and Byju's. The appellate tribunal made a crucial point: since the settlement proposal was submitted after the formation of the CoC, it could not proceed without the consent of at least 90% of the creditor group, in accordance with Section 12A of the Insolvency and Bankruptcy Code. This section is particularly important as it protects the interests of creditors during insolvency proceedings.

The committee of creditors in this case comprises GLAS Trust, a US-based trustee that represents lenders to whom Byju's owes a staggering $1.2 billion. Notably, Aditya Birla Finance is also part of this creditor group. According to the admitted claims, GLAS Trust holds an overwhelming 99.4% voting share within the committee, showcasing its significant influence over any decisions regarding the insolvency process.

This case originated from a sponsorship dispute between BCCI and Byju's, with BCCI filing an insolvency plea last year due to unpaid dues totaling 158.9 crore related to a sponsorship agreement with the cricket body established in 2019. The financial strain on Byju's, a prominent player in the edtech sector, underscores the challenges that companies face in maintaining solvency amid mounting debts.

In August 2024, the NCLAT had briefly stayed the insolvency proceedings after a settlement was proposed, but this ruling was subsequently overturned by the Supreme Court in October, following objections raised by GLAS Trust. The lender argued that the funds proposed for the settlement by Ravindran were questionable and should instead be allocated towards fulfilling broader debt obligations, highlighting the complexities involved in negotiating settlements during insolvency.

Ravindran, along with BCCI, contended that their application to withdraw from the insolvency proceedings was submitted before the CoC was formed. However, the tribunal clarified that the official withdrawal application, labeled as Form FA, was filed on November 14, 2024, well after the CoC had already been constituted. Consequently, the tribunal determined that the application necessitated mandatory consent from the creditors, emphasizing the importance of adhering to procedural norms in corporate insolvency matters.