Byju's Insolvency: NCLT Directs Creditors' Committee To Take Decision On Insolvency Withdrawal

The National Company Law Tribunal directed that the Board of Control for Cricket in India's insolvency withdrawal application be submitted to Byju's committee of creditors so that it could be put to a vote.

Under the Insolvency and Bankruptcy Code, an application for withdrawal of the insolvency process can be accepted by the NCLT if 90% or more of the committee of creditors vote in favour of the withdrawal.

This figure assumes significance as just a few days ago, the NCLT reinstated US-based lenders that are represented by Glas Trust LLC to the CoC. Glas Trust has a voting share value of 99.41% in Byju's CoC. Glas Trust is looking to recover over Rs 11,000 crore from Byju's.

After the NCLT pronounced its order, the lawyers involved in the case brought up the issue of the resolution professional not adhering to the tribunal's orders.

The tribunal's order clearly directed the resolution professional to convene a meeting of the CoC after the tribunal reconstituted the CoC, the lawyers said.

The tribunal was informed that not only was the meeting not convened with immediate effect but the resolution professional's antics did not allow the meeting to go ahead several days after the tribunal's order from last month. The NCLT asked the lawyers to file a separate application against the resolution professional's conduct.

In October, the apex court set aside an order of the NCLAT that put an end to the ed-tech firm's insolvency process. In effect, the insolvency process was set to continue.

While setting aside the NCLAT order, the top court categorically stated that the due process of law was not followed by the appellate tribunal when it put an end to the insolvency process.

US-based lenders, represented by Glas Trust LLC, were before the apex court on the allegation that Byju's owed them over Rs 11,000 crore and that the NCLAT ended the insolvency process following a small settlement of Rs 158 crore between Byju's and the BCCI.

Crucially, when the top court had stayed the NCLAT order before pronouncing its final order in the case, the committee of creditors was constituted and then re-constituted. The re-constitution resulted in the removal of US-based lenders from the committee even after establishing that their voting share in the CoC by value is 99.41%.

At the time, the resolution professional had contended that the claims of US-based lenders were 'contingent' in nature and, therefore, a removal from the CoC was essential.

In its aftermath, the NCLT reinstated Glas Trust and Aditya Birla Finance to the committee of creditors and directed the initiation of disciplinary proceedings against Byju's resolution professional for his prejudicial conduct and for his attempts to 'mislead' the tribunal.