The court's decision is a significant setback for the lenders trying to gain control of the disputed funds, claims Byju’s.
In a hearing presided over by Judge John T. Dorsey of the United States Bankruptcy Court for the District of Delaware, edtech firm Byju’s mentioned that the judge rejected the request made by the alleged debtor in possession and TLB Lenders for a mandatory injunction seeking deposit of the money with the court.
Byju’s said that the court granted a preliminary injunction preventing transfers of the funds. This means that the funds remain safe where they are, and the same cannot be utilised or further transferred. The court's decision is a major setback for the lenders trying to gain control of the disputed funds, as per Byju’s. This is because the court found that they had not met the necessary criteria for granting a mandatory injunction.
The legal representative for Byju’s Alpha, the party accused of being in possession of debt, acknowledged that the lenders of Byju’s TLB (Term Loan B) had conducted their own verification process. As per the verification, it was confirmed that $500 million in funds belonged to a subsidiary of Byju’s as of early 2023, reads the company statement.
“This supports Byju’s stance that the money has all along been with BYJU’s subsidiaries and that Byju’s has all along acted transparently and in good faith,” claims BYJU’s.
“They cannot ask for draconian provisions in a bankruptcy court merely to pursue their demand for a monetary refund,” the counsel said. “This is not a case of irreparable harm. They know this. That is why they withdrew their case in Florida. They are trying to enforce the rights they are not entitled to,” he added. The council also pleaded that it was outside the jurisdiction of the Delaware court to issue an injunction, though the judge proceeded to issue one.
“If they want to maintain their claim that BYJU's is in breach of the covenant, then the proper jurisdiction is not Delaware but New York,” he submitted. “Instead, they have chosen to file their case in bankruptcy court, which suggests that their primary objective is to seek a refund rather than address any alleged contractual violations.”
The edtech platform further said that it has made every interest payment under the credit agreement (on time and in full) until the ad hoc lender group arbitrarily and unlawfully accelerated the repayment of the loan. In fact, in Delaware Chancery Court proceedings initiated by lenders shortly after its unlawful acceleration, the Chancery Court ruled that lenders were not entitled to information in relation to the sums.
“This case represents a concerning attempt by a group of opportunistic foreign lenders to exploit an Indian start-up by leveling baseless allegations with the sole intent of extracting punitive monetary concessions,” said Byju’s.
With the lenders' statements and the court's ruling rejecting the relief for mandatory injunction, Byju’s has gained significant ground in the legal battle that has been forced upon it, according to a company statement.
To safeguard lenders who claim exclusive rights to the funds, US Bankruptcy Judge John Dorsey issued a directive for edtech tech firm Think and Learn Pvt. to freeze $533 million. The court intervention was sought by lenders to prevent Byju’s from utilising the funds.
A report by Bloomberg (later published in Business Standard) said that this decision was a partial win for the lenders, as they clamored for the funds to be placed under federal court supervision. This was done to prevent any potential misuse by Think and Learn. Riju Ravindran, a director at the company and sibling of founder Byju Raveendran, was the target of the court order.
In November 2023, lenders took control of a company that Think & Learn, or Byju's, created to borrow $1.2 billion. That company, Byju’s Alpha, is now bankrupt, and it is being managed by Dorsey. The Bloomberg report further says that Raveendran has been protesting the court’s decision that allowed lenders to take control.