Indian official and the US creditors have been in dispute with each other. (Photo: Reuters)
A US court ruling that placed into bankruptcy units associated with Indian education technology company Byju’s took an official in the firm’s home country by surprise.
The decision, made at a Tuesday hearing in Delaware, will lead to involuntary Chapter 11 bankruptcy of units including Neuron Fuel Inc., Epic! Creations Inc. and Tangible Play Inc., court papers showed. The order was made as a default judgment after the units failed to share requested information with creditors.
The development was “surprising” and “in conflict” with insolvency proceedings in India, wrote Pankaj Srivastava in a letter following the decision. Srivastava, appointed this year as Byju’s Interim Resolution Professional, is requesting to stay the effect of the bankruptcy.
The creditors, led by HPS Investment Partners, filed the petition in June, accusing company founder Byju Raveendran of violating their debt contracts by refusing to give them financial details about the three units. Judge Brendan Shannon also granted lenders’ request to appoint an independent Chapter 11 trustee to manage the Byju units in bankruptcy.
Byju’s, once valued at $22 billion and symbolised India’s technology ambitions, is embroiled in more than half a dozen bankruptcy cases in India and abroad. The company’s business had a boost from the Covid-19 pandemic, but ran into a liquidity crunch after classroom resumed. Creditors in the US and India have been suing for repayments.
Epic and the other Byju units opposed the forced bankruptcy. In a September court filing, they claimed that the lenders lacked legal standing to initiate the bankruptcy and argued the filings were an improper “tactical maneuver“ meant to get an edge over the Byju units in related litigation.
The “Resolution Professional has the duty to take control of the corporate debtor’s assets,” Srivastava wrote, citing Indian insolvency law. He didn’t appear at the hearing, court papers showed.
The Indian official and the US creditors have been in dispute with each other in the complicated cross-border bankruptcy procedures. US lenders to Byju’s were removed from an influential creditors committee in India — a decision made by Srivastava.
It’s unclear whether the request from the Indian official will change the ruling. Byju’s petitioning creditors said they “disagree with the letter” and asked the judge to sign the order so that the bankruptcy could take effect, adding that the letter is informal. As of Friday at noon, there’s been no public disclosure of an order being signed by the judge.
First Published: Sep 14 2024 | 7:58 AM IST
