Supreme Court Quashes NCLAT's Ruling On Byju's Insolvency Proceedings

The SC bench criticised the NCLAT for using its discretionary powers to stop the insolvency process, highlighting that proper procedures under the Insolvency and Bankruptcy Code must be followed

Byju's, the BCCI, and Glas Trust Company can seek legal remedies as provided by law, the court noted, adding that its observations should not be held against any of the parties involved.

Source : PTI

The Supreme Court on Wednesday overturned the National Company Law Appellate Tribunal's (NCLAT) decision to halt insolvency proceedings against embattled ed-tech company Byju's. A bench led by Chief Justice D Y Chandrachud, along with Justices J B Pardiwala and Manoj Misra, also revoked the NCLAT's approval of Byju’s Rs 158.9 crore settlement with the Board of Control for Cricket in India (BCCI). The court directed the BCCI to deposit the settlement amount with Byju's committee of creditors (CoC).

The apex court ruled that Glas Trust Company LLC, a US-based creditor, has the legal standing to intervene in the insolvency proceedings involving Byju's. The bench criticised the NCLAT for using its discretionary powers to stop the insolvency process, highlighting that proper procedures under the Insolvency and Bankruptcy Code (IBC) must be followed.

"The NCLAT is not merely a rubber stamp for approving withdrawal applications in corporate insolvency cases," the court stated. It clarified that the application for withdrawal should have been submitted by the Insolvency Resolution Professional (IRP) and not by Byju's or other parties involved.

The Supreme Court found the NCLAT's exercise of its discretionary powers inappropriate, stating that inherent powers cannot be used to circumvent established legal procedures. It further directed that the Rs 158.9 crore, along with any accrued interest, be placed in a separate account managed by the CoC until further orders.

Byju's, the BCCI, and Glas Trust Company can seek legal remedies as provided by law, the court noted, adding that its observations should not be held against any of the parties involved.

The Supreme Court addressed three key issues in its ruling. The US firm's right to intervene in the proceedings, the legitimacy of the NCLAT's decision to halt the Corporate Insolvency Resolution Process (CIRP), and whether the tribunal had adequately addressed objections raised by Glas Trust Company.

The bench discussed the evolution of legal provisions for withdrawing insolvency applications after they have been admitted. It emphasized that a detailed process exists to handle settlements or withdrawals at different stages of insolvency and that the NCLAT's use of discretionary powers was no longer necessary in such cases.

Byju’s had previously reached a Rs 158.9 crore settlement with the BCCI, which was approved by the NCLAT on August 2. However, Glas Trust Company challenged the ruling, prompting the Supreme Court to intervene. The bench reserved its decision on September 26, ultimately siding with the US firm.

Byju’s, which signed a "team sponsor agreement" with the BCCI in 2019, defaulted on payments to the cricket board in 2022, leading to insolvency proceedings. The ed-tech firm then reached a settlement with the BCCI, which the Supreme Court has now ordered to be revisited under proper legal procedures.