Byju's creditor blocked from settling solo after insolvency admission

BCCI got its Rs 158 crore from Byju's brother. So why did the Supreme Court say that settlement was illegal? Because by the time Riju Raveendran wrote that personal cheque, the insolvency process had already begun — and the law says that once the game starts, no single player gets to walk away with the ball.

When the NCLT said "admitted"

Think and Learn Pvt Ltd — the company that runs Byju's — owed the Board of Control for Cricket in India (BCCI) roughly Rs 158 crore under a sponsorship deal. BCCI filed an insolvency petition. On July 16, 2024, the National Company Law Tribunal (NCLT), Bengaluru, admitted that petition. That single word — "admitted" — triggered something irreversible. The NCLT order sheet, stamped and signed, sat on the registrar's desk: the Corporate Insolvency Resolution Process (CIRP — the formal process where a company's creditors collectively decide its fate) had begun. A court-appointed manager, called an Interim Resolution Professional (IRP), took over the company's operations. A moratorium (a legal freeze on all lawsuits, debt recovery actions, and asset transfers against the company) kicked in immediately. Every creditor — not just BCCI — now had a seat at the table. The air in the Bengaluru tribunal room carried the faint smell of old case files and the weight of a process that could no longer be undone by a single handshake.

The brother's cheque and the shortcut

Before the committee of creditors could even be formed, Riju Raveendran — brother of Byju's founder Byju Raveendran — stepped in. He offered to pay BCCI's Rs 158 crore from his personal funds. The cheque he wrote, a thin slip of paper with a signature that promised to end the dispute, was handed over. BCCI agreed. The two parties went to the National Company Law Appellate Tribunal (NCLAT — the appellate body that hears appeals against NCLT orders) and asked it to approve the settlement and cancel the insolvency order.

The NCLAT said yes. It used Rule 11 of the NCLAT Rules 2016 (a provision that gives the tribunal inherent powers to do whatever is necessary to meet the ends of justice). It set aside the NCLT's admission order. The CIRP was dead. BCCI had its money. The Raveendran family had its company back. The NCLAT order sheet, crisp and final, seemed to close the matter.

But one creditor was not at that table.

A foreign lender's objection

GLAS Trust Company LLC represented foreign lenders who had given USD 1.2 billion to Byju's US subsidiary. Byju Raveendran had personally guaranteed that loan. When the US subsidiary defaulted, the lenders turned to the guarantor — Byju's in India. GLAS Trust had filed its own insolvency petition under Section 7 of the Insolvency and Bankruptcy Code (IBC — the law that allows a financial creditor to start CIRP against a company that owes it money) in January 2024.

When the NCLT admitted BCCI's petition in July, it disposed of GLAS Trust's petition with a simple instruction: file your claim before the IRP, and you can revive your petition later if needed. GLAS Trust was now a creditor in the CIRP — one of many. It had a stake in the collective process.

Then the NCLAT killed that process with a private deal between BCCI and Riju Raveendran. GLAS Trust challenged the NCLAT order before the Supreme Court. Its argument was simple: you cannot bypass the statutory procedure for withdrawing a CIRP, ignore every other creditor's interests, and approve a settlement whose source of funds looks suspicious — especially when a US court was already examining allegations that USD 533 million had been fraudulently transferred out of Byju's. The courtroom in the Supreme Court fell silent as counsel for GLAS Trust laid out the timeline: the US proceedings, the allegedly diverted millions, and the brother's cheque that seemed to appear just in time to rescue the company.

The path the NCLAT chose not to take

The IBC has a specific procedure for withdrawing a CIRP after admission. Section 12A of the IBC (the provision that allows withdrawal of an insolvency application after it has been admitted) read with Regulation 30A of the CIRP Regulations (the detailed rules for how such a withdrawal must be processed) requires that the application for withdrawal must come from the applicant creditor — but only after the committee of creditors has been formed and has voted on it. The voting threshold is high: 90% of the voting share of the committee must approve.

Why 90%? Because once CIRP starts, the process belongs to all creditors collectively. A single creditor cannot extinguish everyone else's rights by cutting a private deal. The Supreme Court had already established this principle in Swiss Ribbons (P) Ltd. v. Union of India (2019) and Arun Kumar Jagatramka v. Jindal Steel & Power Ltd (2021). The smell of old paper in the court library seemed to whisper the same truth: precedent binds, procedure protects.

The NCLAT bypassed this entire framework. It used Rule 11 — its inherent powers — to approve a bilateral settlement before the committee of creditors was even formed. The Supreme Court found this legally flawed on multiple grounds.

What the Supreme Court said

The bench led by Chief Justice Dr Dhananjaya Y Chandrachud delivered its judgment on October 22, 2024. The courtroom was still, the only sound the rustle of robes and the turning of pages, as the Chief Justice read the operative findings. The court held that a creditor who is not party to a bilateral settlement has locus standi (the legal right to challenge a proceeding that affects its interests) to object. Once CIRP is admitted, third-party rights are created in all creditors. A private deal between one creditor and the promoter cannot extinguish those rights.

On the use of Rule 11, the court was blunt: inherent powers cannot be invoked to circumvent a prescribed statutory procedure when that procedure is available and applicable. Section 12A and Regulation 30A exist precisely for this situation. The NCLAT cannot invent a shortcut because the shortcut seems convenient. The court observed, in its reasoning, that "the statutory scheme under Section 12A read with Regulation 30A provides a complete code for withdrawal of a CIRP once admitted; inherent powers under Rule 11 cannot supplant that code."

The court also held that when exercising discretionary powers, the NCLAT must adequately address substantive objections raised by affected parties. Concerns about the source of funds — especially when a US court was examining allegations of fraudulent transfers — could not be dismissed with a mere undertaking. The tribunal should have scrutinised where the money came from. The bench's silence after this pronouncement felt heavier than any argument; it was the sound of a principle being set in stone.

The CIRP resumes, the money sits in escrow

The Supreme Court set aside the NCLAT order. It granted a stay on the impugned judgment. The CIRP proceedings resumed from where they had stopped. BCCI was directed to maintain the Rs 158 crore it had received in an escrow account (a neutral third-party account that holds funds until a dispute is resolved). The escrow document, a single page with bank stamps and signatures, now held the contested sum in limbo. The money is there, but it does not belong to BCCI yet — not until the collective process determines how all creditors should be paid.

THE PLAY: Once CIRP is admitted, no single creditor can settle with the promoter and walk away — the only exit is through Section 12A with 90% creditor approval, not through inherent powers.

The court ended where it began: with a cheque that could not buy what it was meant to purchase.