A U.S. court’s unexpected ruling has placed several units associated with Indian education technology company BYJU‘s into bankruptcy, catching an official in the firm’s home country off guard. During a Tuesday hearing in Delaware, the court ordered involuntary Chapter 11 bankruptcy proceedings against BYJU’s U.S.-based units including Neuron Fuel Inc., Epic! Creations Inc., and Tangible Play Inc. This decision was made as a default judgment after the units failed to provide requested information to creditors, as revealed in court documents.
Pankaj Srivastava, BYJU’s Interim Resolution Professional, has expressed surprise and concern over the U.S. court’s bankruptcy ruling, stating it contradicts ongoing insolvency proceedings in India. In a letter, Srivastava requested a stay on the bankruptcy’s effects, seeking to pause its implementation.
In June, creditors, led by HPS Investment Partners, filed a petition alleging that BYJU’s founder, Byju Raveendran, breached debt agreements by withholding financial information about three units. Judge Brendan Shannon ruled in favor of the lenders, granting their request to appoint an independent trustee to oversee the BYJU’s units during the Chapter 11 bankruptcy proceedings.
India’s edtech giant BYJU’s, valued at $22 billion at its peak, is grappling with a series of bankruptcy cases, both domestically and internationally, totaling over half a dozen. The pandemic-driven surge in business was short-lived, as the company struggled with liquidity issues after schools resumed in-person classes. As a result, creditors in the U.S. and India are taking legal action to recover their investments.
BYJU’s units, including Epic, contested the involuntary bankruptcy filing, arguing in a September court filing that the lenders lacked the necessary legal standing to initiate the process. They further claimed that the bankruptcy filings were a strategic tactic aimed at gaining an advantage in related lawsuits, rather than a genuine attempt to address financial distress.
Srivastava wrote, “The Resolution Professional has the duty to take control of the corporate debtor’s assets,” referencing Indian insolvency law, but failed to appear at the hearing, according to court records.
A contentious cross-border bankruptcy dispute has been unfolding between the Indian official and U.S. creditors. The tensions escalated after Srivastava removed U.S. lenders to BYJU’s from a key creditors committee in India, further complicating the proceedings.
The outcome of BYJU’s bankruptcy case remains uncertain due to a request from an Indian official, which has been met with disagreement from the company’s petitioning creditors. The creditors have expressed their disapproval of the letter, labeling it as informal, and have urged the judge to sign the order, allowing the bankruptcy proceedings to move forward. Despite this, there has been no public update on the judge’s decision, leaving the status of the case unresolved as of Friday at noon. The judge’s response to the request and the subsequent impact on the ruling remain to be seen.
As far as BYJU’s bankruptcy scene in India is concerned, the Supreme Court has scheduled a hearing for September 17 to consider an appeal filed by BYJU’s U.S.-based creditor Glas Trust Company LLC, challenging the National Company Law Appellate Tribunal‘s (NCLAT) decision to halt insolvency proceedings against ed-tech company BYJU’s and approve its settlement of INR 158.9 crore with the Board of Control for Cricket in India (BCCI).
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