The National Company Law Tribunal (NCLT) has ordered the removal of Byju’s interim resolution professional (IRP) on Wednesday. The insolvency court also instructed the Insolvency and Bankruptcy Board of India (IBBI) to initiate disciplinary action against the IRP and to dissolve the committee of creditors (CoC) formed by the IRP. This decision was made by the NCLT’s Bengaluru bench in response to complaints from Byju’s lenders, Glass Trust Company and Aditya Birla Finance Ltd, who alleged fraudulent practices in the classification of creditors.
The tribunal’s order emphasized that the IRP is obligated to assist the tribunal with integrity and fairness, stating that the IRP’s actions appeared intended to mislead the tribunal. It noted that the IRP’s conduct was detrimental to the corporate insolvency resolution process (CIRP) as defined by the Insolvency and Bankruptcy Code (IBC) of 2016, and that such behavior warranted disciplinary measures from the IBBI.
Additionally, the tribunal reinstated Aditya Birla Finance as a financial creditor, restoring all associated rights and responsibilities under the IBC. It also annulled the reconstitution of the CoC scheduled for August 31, 2024, and reinstated the previous CoC from August 21, 2024.
Glass Trust, which provided Byju’s with a $1.2 billion Term Loan B, and Aditya Birla Finance approached the NCLT in September, accusing the IRP, Pankaj Srivastava, of misconduct during the bankruptcy proceedings. Aditya Birla Finance claimed that the IRP fraudulently classified it as an operational creditor rather than a financial creditor. Financial creditors, who provide loans or credit, have a primary claim on a bankrupt company’s assets, while operational creditors, who supply goods or services, are secondary.
Glass Trust further alleged that Pankaj Srivastava unlawfully removed it from the CoC, despite acknowledging the lender’s claims as ‘contingent liability.’ The NCLT had initiated insolvency proceedings against Byju’s on June 16, 2024, due to a default of ₹158 crore owed to the Board of Control for Cricket in India (BCCI) related to a sponsorship deal. Byju’s had entered into a sponsorship agreement with BCCI in 2019, which included its branding on the Indian cricket team’s jerseys. Although the contract was extended until November 2023, Byju’s failure to fulfill its financial obligations led the BCCI to file an insolvency petition with the NCLT. Both parties, however, have since filed for a settlement application.
