Supreme Court Reverses NCLAT Ruling regarding Byju’s Insolvency

The NCLAT had stopped the insolvency proceedings against Byju’s an edtech company saying some approvals in the settlement were procedural.

The Supreme Court has quashed NCLAT order which had put brakes on insolvency proceedings against Byju’s, the edtech company. By a majority verdict, setting aside the NCLAT’s order that had approved Rs 158.9 crore settlement by Byju’s with the Board of Control for Cricket in India (BCCI), the Supreme Court noted that the crisis does not annul the authority of Chief Justice D Y Chandrachud.

The Court opined that the NCLAT failed to observe the right processes and procedure of the Insolvency and Bankruptcy Code (IBC), to tainted approval of the settlement. Consequently, BCCI, which had deposited Rs 158 crore in an escrow account, will now transfer it to an account operated by the Committee of Creditors (CoC).

Since June 2023, Byju’s has received increasing legal actions in the India and US courts after defaulting on a $1.2 billion term loan. The BCCI later instituted insolvency proceedings because Byju failed to pay Rs 158 crore back.  Though the NCLAT had earlier provided a bail out by approving the settlement, Glas Trust’s grounds forced the Supreme Court’s intervention in the concerned case where market instability in the edtech sector is not yet over.

This ruling emerges from an appeal by Glas Trust Company LLC, a US creditor to the NCLAT’s decision. The Supreme Court said that the NCLAT did not provide a constructive analysis of the consequences of shutting the insolvency proceeding against the struggling edtech firm and directed the reconsideration.