NCLAT dismisses Byju Raveendran challenge to constitution of Byju's CoC

The National Company Law Appellate Tribunal (NCLAT) in Chennai on Tuesday dismissed an appeal filed by Byju Raveendran, the suspended director and promoter of Think and Learn Private Limited (BYJU'S), challenging the validity of the Committee of Creditors (CoC) constituted during the company's insolvency proceedings [Byju Raveendran Vs Aditya Birla Finance].

A Bench comprising Justice Rakesh Kumar Jain (Judicial Member) and Jatindranath Swain (Technical Member) affirmed the January 29 order of the National Company Law Tribunal (NCLT) at Bengaluru which had restored Aditya Birla Finance Limited (ABFL) as a financial creditor and directed disciplinary proceedings against Interim Resolution Professional (IRP) Pankaj Srivastava.

"Although, Counsel for the Appellant and even the Applicant have argued vehemently that the impugned order is illegal and deserves to be set aside yet they have failed to cite any provision in the Code nor any precedent to the effect that the status of a creditor who has been made part of the CoC, can be reviewed by the RP on his own," the NCLAT held.

The corporate insolvency resolution process (CIRP) against BYJU’S was admitted on July 16, 2024 on a petition by the Board of Control for Cricket in India (BCCI). IRP Pankaj Srivastava invited claims and on August 21, 2024, constituted the Committee of Creditors (CoC) with four financial creditors - Glass Trust Company LLC (99.41% voting share), Aditya Birla Finance Ltd (0.41%), Incred Financial Services Ltd (0.18%) and ICICI Bank Ltd (nil claim).

On August 31, 2024, Srivastava reconstituted the CoC, removing Glass Trust and ABFL, leaving Incred Financial as the sole member with 100% voting rights. ABFL was reclassified as an operational creditor and Glass Trust’s claim was deemed contingent.

This reconstitution effectively removed Glass Trust Company LLC, which held a 99.41% voting share with claims of over ₹11,400 crores and Aditya Birla Finance Limited, which held a 0.41% share with claims of ₹47.12 crores.

The NCLT found this action to be procedurally improper and potentially mischievous.

It held this reconstitution was beyond the IRP’s powers and prejudicial to the CIRP. It restored the August 21 CoC, reinstated ABFL as a financial creditor, set aside resolutions of the reconstituted CoC and referred the IRP to the IBBI for disciplinary action.

Byju Raveendran challenged this order before NCLAT.

The NCLAT addressed the core issue of whether a resolution professional can unilaterally change creditor classifications and committee membership after initial constitution. The tribunal applied established precedents to reject such powers.

"The argument of the Appellant about the provisional constitution of the CoC can not be accepted because there is no provision in the Code," the NCLAT ruled, rejecting arguments that the initial committee formation was merely provisional and subject to later revision.

The NCLAT firmly rejected the appellant’s argument that the original CoC was “provisional.”

"Similarly, the argument of the Appellant about the provisional constitution of the CoC can not be accepted because there is no provision in the Code," the NCLAT ruled.

It also endorsed the NCLT’s strong language against the IRP’s actions.

“Respondent No. 2 (IRP)… reconstituted the CoC with only one member with 0.18% voting share in the originally constituted CoC, by excluding Respondent No. 1 and 3 in a manner that can only be termed mischievous,” the order stated.

The NCLAT rejected the appellant’s plea that all actions by the IRP, including the original CoC formation, should be voided due to his misconduct.

“The argument… cannot be accepted,” the Bench said, making it clear that valid initial acts cannot be nullified simply because later actions were improper.

The tribunal also disposed of an impleadment application by suspended director Riju Ravindran.

“He has nothing to add to the appeal which has been filed by none else than his real brother who is also similarly placed,” it observed.

Thus, the NCLAT concluded that the NCLT had taken into consideration all aspects of the matter before issuing its directions and the order did not warrant any interference.

Byju Raveendran was represented by Senior Advocates Guru Krishnakumar and Abhijit Sinha along with advocates V Shyamohan, Sradhaxna Mudrika, Isha Ghai, Anshika Bajpai, Vrinda Baheti, Riya Sara Renchen and Vishesh Goel.

Aditya Birla Finance was represented by advocates Aparajitha Vishwanath, Sneha Parthasarathy and Ahaan Mohan.

The present RP Shailendra Ajmera was represented by Senior Advocate Abhinav Vasisht along with advocates Pooja Mahajan, Arveena Sharma, Savar Mahajan, Ichchha Kalash, Samridhi Shrimali, Lakshana Viravalli, S. Madhusmitha and Akshita Sachdeva Jaitly from Chandhiok and Mahajan.

Glas Trust was represented by Senior Advocate Krishnendu Datta with advocates Prateek Kumar, Raveena Rai, Moha Paranjpe and Sidhant Grover.

Riju Raveendran was represented by Senior Advocate Haripriya Padmanabhan and advocates Pooja Dhar, Vishal Sinha, Shreya Nair and Pratul Pratap Singh.

[Read Judgment]