Creditors Take Control: Is Byju's Future Uncertain?

Byju's request to prevent the resolution expert from assembling a committee of creditors (CoC) for the bankrupt edtech company was denied by the Supreme Court on Tuesday, pending the court's ruling. The debt settlement specialist's primary responsibility is to compile detailed data on all of Byju's responsibilities owed to its many stakeholders and then assemble a committee of creditors. In principle, this committee would take control of the business and direct the further stages of the insolvency procedure. The Supreme Court denied Byju's bid for temporary relief, but it has agreed to hear the matter in full on 22 August.

Why did the BCCI drag Byju's to the bankruptcy court?

The business had asked the cricket board to cash a bank guarantee worth ₹140 crores, and another ₹160 crore was to be paid overtime in instalments. At last, BCCI took Byju's to court on insolvency grounds for purportedly missing payments totaling ₹158 crores. After the edtech company failed to pay the cricket board's dues, the National Company Law Tribunal (NCLT) ordered that corporate bankruptcy proceedings be started against it. On 2 August, the NCLAT set aside this order but allowed the BCCI to settle. To pay the BCCI, Riju Raveendran, the brother of the company's founder, had amassed ₹158 crore.

What does the denial from the court of Byju's bid for temporary relief mean?

There are important consequences for the Supreme Court's decision to reject Byju's request. The corporation may restructure under a resolution professional if the insolvency proceedings continue. Should a solution not be reached, Byju's may be forced into liquidation, which would mean asset sales. The company's valuation could be lowered, and investor confidence could be affected by this circumstance. Employees can also lose their jobs, depending on how these legal actions turn out. The insolvency proceedings against Byju's will proceed due to the refusal of interim relief. This may result in hiring a resolution specialist to manage the business's affairs and look into debt restructuring alternatives. Should a settlement not be achieved, the company may be pushed into liquidation, which would mean selling its assets and giving the money raised to its creditors. The long legal dispute and doubts about Byju's future may hurt investor confidence and the company's valuation. Employees of Byju may lose their jobs, depending on how the insolvency processes turn out.

Byju's plan after the denial in court is as follows:

The founder of the troubled edtech company, Byju Raveendran, has told staff members that their unpaid salary will be disbursed as soon as the business reclaims control of its finances. Salary payments have been temporarily delayed due to the management's inability to provide further funds due to the continuing legal struggle. Raveendran is confident in the company's future and can overcome its obstacles despite this setback. The legal matter must be resolved for Byju's to resume operations and achieve financial stability.

What will happen to Byju's in the future?

The Supreme Court is presently considering Byju's case. If Byju's wins in court, the business will be free to carry on as usual. Byju's might, however, be subject to bankruptcy procedures if the court rules in favour of the lenders. The lenders want to take over the business, so they're attempting to stop Byju's from paying off its debts. Suppose the lenders can't prove that Byju's committed fraud; it's unlikely that the court will prevent the company from paying off its debts. In general, the ruling of the Supreme Court will determine Byju's future.