NCLT orders removal of Byju’s IRP, reinstates Aditya Birla Finance as financial creditor | Company Business News-OxBig News Network

The National Company Law Tribunal (NCLT) on Wednesday ordered the removal of Bjyu’s interim resolution professional (IRP).

The insolvency court also directed the Insolvency and Bankruptcy Board of India (IBBI) to take disciplinary action against the IRP and disband the committee of creditors (CoC) constituted by the IRP.

The NCLT’s Bengaluru bench passed the order on the pleas of Byju’s lenders, US-based Glass Trust Company and Aditya Birla Finance Ltd, who alleged fraud in creditor classification. 

“It is clear from the aforementioned that the IRP has a duty to assist the tribunal with integrity in an honest and fair manner, and the conduct of the IRP in the present case has been filed with the intent to mislead the tribunal,” the order said. 

“The actions and decisions taken by the IRP are prejudicial to the interests of the corporate insolvency resolution process (CIRP) outlined by the Insolvency and Bankruptcy Code (IBC), 2016, and to stakeholders… the above conduct on the part of the IRP needs to be dealt with by way of disciplinary proceedings by the IBBI,” the order added.

The tribunal reinstated Aditya Birla Finance as a financial creditor, with all the rights and responsibilities associated with this status under the IBC.

It further directed the reconstitution of the CoC on 31 August 2024 be cancelled and the erstwhile CoC from 21 August 2024 be retained.

Glass Trust, which provided Byju’s with a $1.2-billion Term Loan B, and Aditya Birla Finance moved NCLT in September, accusing Byju’s IRP, Pankaj Srivastava, of misconduct in the bankruptcy process.

Aditya Birla Finance accused the IRP of committing fraud in the edtech’s CIRP. It alleged wrongful classification as an operational creditor instead of a financial creditor.

Financial creditors provide loans or other forms of credit to a company, while operational creditors supply goods or services as part of the company’s regular business activities. The primary distinction between the two lies in the nature of their claims during an insolvency process.

Financial creditors have a primary claim on a bankrupt company’s assets, followed by operational creditors. India’s IBC aims to balance the interests of both types of creditors to ensure a fair and transparent insolvency process for all parties involved.

Glas Trust alleged that Pankaj Srivastava unlawfully ousted it from the CoC. Srivastava had admitted the lender’s claims under ‘contingent liability’.

The NCLT initiated insolvency proceedings against Byju’s on 16 June 2024 for defaulting on dues worth ₹158 crore owed to the Board of Control for Cricket in India (BCCI) as part of a sponsorship deal.

Byju’s had entered into a sponsorship agreement with BCCI in 2019, featuring its branding on the Indian cricket team’s jerseys. The contract was extended until November 2023, but when Byju’s failed to meet its financial obligations, the BCCI filed an insolvency petition with the NCLT.

However, both have filed for a settlement application before the court. The NCLT has yet to pass an order.

Earlier, the Supreme Court quashed an older settlement process on 23 October. The court found that the settlement did not follow the due process under the IBC and instructed the parties to approach the NCLT for fresh proceedings.

Byju Raveendran had challenged the insolvency proceedings before the National Company Law Appellate Tribunal (NCLAT). On 2 August, the NCLAT dismissed the insolvency proceedings against Byju’s and approved the settlement with the BCCI after Riju Raveendran raised the ₹158 crore to repay the cricket board, temporarily restoring his control over the company’s operations.

Glass Trust had argued that the funds raised by Riju Raveendran, Byju’s founder’s brother, for the settlement, were “tainted” and should be allocated to financial creditors. 

Additionally, it cited ongoing investigations by the Enforcement Directorate into Byju’s financial dealings. Byju Raveendran currently resides in Dubai, while Riju is based in London. 

Founded in 2011 by Byju Raveendran and Divya Gokulnath, Byju’s quickly became a leading player in India’s ed-tech sector. However, the company’s aggressive expansion has been marred by financial difficulties, regulatory scrutiny, and disputes with creditors. Once considered India’s most celebrated startup,