CEO Morning Brief

Top Court Rejects Byju’s Settlement, Paving Way for Insolvency

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Publish date: Thu, 24 Oct 2024, 11:03 PM
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TheEdge CEO Morning Brief

(Oct 23): India’s top court struck down a tribunal order that allowed Byju’s to settle debts with a creditor, pushing the online tutor back firmly into the insolvency process and taking it a step closer to failure.

The Supreme Court order Wednesday is a setback for founder Byju Raveendran and his eponymous firm, and it keeps control of the education company with a bankruptcy professional. It’s a win for US-based creditor Glas Trust Company, which had opposed the settlement with the Indian creditor — the ruling body of India’s cricket — and is itself seeking funds from Byju’s.

The order leaves Byju’s near the end of a high-profile existence during which it reached a US$22 billion (RM95.6 billion) valuation. Started in 2015, the online-tutoring service quickly gained fans and then saw its business surge during the Covid-19 pandemic, prompting Raveendran to expand abroad and making him a billionaire in the process. But as infections subsided and classrooms resumed, its cash pile shrank and the company ran into legal problems in the US as well as its domestic market.

The Supreme Court found that the appeals tribunal didn’t follow the due legal procedure while allowing a settlement between Byju’s and the cricket board. Its order means that Byju’s, Glas Trust and the cricket board will take the case back to the bankruptcy court.

India’s insolvency resolution process requires a court-appointed professional to run the company until a creditors’ panel is formed. This panel then seeks claims from other potential creditors, and it can later ask for bids for the company from potential buyers. A companies court has to approve any such purchase. A company is liquidated if it doesn’t find a buyer.

Raveendran’s firm, once a poster child for India’s burgeoning startup industry, is one of several once-lionised tech firms that have been hit by financial or legal troubles. Paytm, the firm that popularised online finance across India, is struggling to address the fallout from an abrupt suspension of a key division by the central bank.

In August, an Indian companies’ appeals court quashed an insolvency order issued by a lower court and ruled that Byju’s can settle its case with the Board of Control for Cricket in India. The firm owed the cricket overseer 1.59 billion rupees.

Glas Trust, the trustee for lenders owed US$1.2 billion, earlier asked a US bankruptcy judge to block Riju Ravindran, a brother of Byju’s founder, from paying the cricket board. The US lenders have argued that his cash should be used to pay them, not debt owed to the Indian cricket body. Byju’s lawyers have previously told courts that Ravindran is liquidating his assets to pay BCCI, and it’s not the US creditors’ money.

Uploaded by Magessan Varatharaja

Source: TheEdge - 24 Oct 2024

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