Edtech major Byju’s finds itself in yet another legal tangle. After its insolvency proceedings were reinstated in October last year, a new twist emerged when Resolution Professional (RP) Pankaj Srivastava removed two key creditors—Aditya Birla Finance and U.S.-based Glas Trust Company LLC—from the Committee of Creditors (CoC). The decision was swiftly challenged in the Supreme Court. Now, in a significant ruling on January 29, the National Company Law Tribunal (NCLT) has not only reinstated both creditors in the CoC but also ordered disciplinary action against Srivastava, citing his overreach in excluding them. This means that Glas Trust—owed a staggering ₹11,000 crore—along with Aditya Birla Finance—owed ₹47 crore—will now have a say in Byju’s insolvency resolution. Srivastava’s justification for their removal was twofold—he classified Aditya Birla Finance as an "operational creditor" and deemed Glas Trust’s claims as "contingent" due to ongoing disputes in U.S. courts. However, the NCLT found these exclusions to be beyond the RP’s authority. “This is outside the RP’s role, as they only have the power to verify claims, not adjudicate them,” explained Vivek Parti, an insolvency professional, to Business Today. “The NCLT’s strong observations suggest that the RP attempted to exercise judicial discretion, which is not his mandate.” The implications of the ruling extend beyond Byju’s. Legal experts highlight that RPs are rarely replaced unless there is misconduct, negligence, or a violation of the Insolvency and Bankruptcy Code (IBC). “The NCLT and the Insolvency and Bankruptcy Board of India (IBBI) have the power to intervene if an RP acts prejudicially against stakeholders,” said Siddharth Chandrashekhar, Senior Standing Counsel for the Department of Revenue Intelligence (DRI). The tribunal’s findings were damning. It held that the RP: • Incorrectly classified Aditya Birla Finance as an operational creditor instead of a financial creditor. • Excluded Glas Trust from the CoC without valid justification. • Backdated documents and filed misleading applications with the tribunal. • Violated statutory timelines for CoC meetings. With the RP now facing disciplinary scrutiny, questions arise over the broader insolvency landscape in India. “In service-oriented companies, speed is crucial for value preservation. But past cases show that insolvency resolution often struggles with digital-first businesses,” said Mukesh Chand, Senior Counsel at Economic Laws Practice (ELP). The biggest challenge remains time. From finalising a resolution plan to potential liquidation, the process can stretch up to two years, exacerbated by prolonged litigation. “For Byju’s, a turnaround must happen within three months, or liquidation might become inevitable,” he warned.
In another legal battle, as per a report by Bloomberg, Byju’s manager, Vinay Ravindra, and company associate, Rajendran Vellapalath have been found in contempt by a U.S. court for failing to disclose the whereabouts of $533 million in loan proceeds. The court has imposed daily fines of $25,000 until compliance is achieved. This marks at least the third instance where a close associate of Byju's founder, Byju Raveendran, has been ruled in contempt by a U.S. judge. While the NCLT’s ruling safeguards creditor rights and prevents arbitrary exclusions, it also introduces complexities. Reinstating creditors could prolong Byju’s Corporate Insolvency Resolution Process (CIRP), adding financial strain. Chandrashekhar pointed out that disputes in U.S. courts might have justified the RP’s cautious approach. However, the NCLT was certainly justified when it held that the RP exceeded his powers by reclassifying creditors and excluding them without valid reasons. With the latest order, the focus now shifts to how swiftly Byju’s CoC can navigate a resolution.