Indian Court Halts Byju's Bankruptcy Sale After Founders Challenge Massive Lender Claim

By John Damon | Just The News Iowa

An Indian tribunal has halted the bankruptcy sale of troubled edtech giant Byju's until August 31, after the company's founders challenged a lender's claim that gives it more than 99 percent voting power in the creditor committee. The case raises questions about due process, asset recovery, and the fairness of foreign lenders in international insolvency proceedings.

What happened at the NCLT hearing?

The National Company Law Tribunal's Bengaluru bench on Tuesday directed the resolution professional for Think & Learn Private Limited, Byju's parent company, to stop all bidding activity and not finalize the list of prospective buyers until the next hearing. The order came in response to an application by founders Byju Raveendran and Riju Ravindran, who are challenging the massive claim filed by GLAS Trust Company LLC.

GLAS Trust, acting as agent for lenders to a $1.2 billion term loan, has an admitted claim of about Rs 11,433 crore. That claim gives it more than 99 percent of the voting power on the committee of creditors, effectively controlling the bankruptcy process.

“Until 31st August, you should not go on with the Form G,” the bench told the resolution professional, adding that the list of prospective resolution applicants should not be finalized in the meantime.

Why are the founders challenging the lender's authority?

Senior counsel for the founders mounted a direct attack on GLAS Trust's legal standing. “Who is GLAS? GLAS is not lender. GLAS is not borrower. GLAS is not guarantor,” he argued, describing the trustee as “a power of attorney holder at best” claiming “a small sum of 11,000-something crores.”

The founders point to a direction letter dated July 25, 2024, as the only authority document GLAS produced. They argue it is unstamped and unregistered. Of the 124 lenders named in the letter, 46 never signed it at all, meaning the agent's claimed representation “gets reduced by more than one-third” on the face of its own document. None of the 78 lenders who did sign have produced a board resolution or authorization letter empowering GLAS to act for them.

Did lenders already seize Byju's foreign assets?

The founders also told the tribunal that GLAS and the lenders it claims to represent have already seized Byju's foreign subsidiaries' assets worth over $1.2 billion. These assets include Great Learning PTE, BYJU'S PTE, Epic!, Tynker, BYJU'S Alpha, and Tangible Play, taken over through US bankruptcy and Singapore court proceedings.

Many of these recoveries happened after the Indian insolvency began, which the founders argue breaches the moratorium. They claim GLAS never informed Indian courts or the resolution professional about these recoveries, while continuing to claim the full $1.2 billion and hold more than 99 percent of the votes on the creditors committee.

Is the insolvency process running past legal limits?

The founders' counsel pressed a timeline point: the corporate insolvency process was on its “735th day” against the 330-day outer limit under Section 12 of the insolvency code. Supreme Court rulings allow the limit to be crossed only in exceptional cases. “If the period of the CIRP is over, then nobody can go on representing and saying I will do this, that and the other,” he argued, pressing for interim orders.

What do the respondents say?

The resolution professional confined his reply to maintainability, submitting that the same issues were raised in an earlier application and are covered by a Supreme Court status quo order. Counsel for the committee of creditors called the submissions “entirely unwarranted,” saying no interim order was operating and the identical allegations are sub judice.

The founders' counsel shot back: “If there is a decision on a point, then that decision operates as res judicata,” and here, he said, there is none. The tribunal declined wider restraints on the committee for now, noting the respondents must first get an opportunity to reply. But its pause on Form G and bidder shortlisting freezes the next stage of the process until the next hearing.

What's next for Byju's bankruptcy case?

Think & Learn was admitted into insolvency on July 16, 2024, on a Rs 158-crore claim from the BCCI that the founders say was paid in full within weeks. The withdrawal application arising from that settlement is now listed for hearing on September 15. The next NCLT hearing on the founders' challenge is set for August 31.

For Iowa readers, this case highlights the complexities of international business insolvency, the power of foreign lenders, and the importance of due process in bankruptcy proceedings. It serves as a reminder that even in global markets, legal challenges can halt major corporate sales and protect the rights of founders and stakeholders.