Edtech company Byju's, which was once India's most valuable start-up worth an estimated $22 billion, will face insolvency proceedings for failure to pay Rs 158.9 crore to cricket board BCCI.
The Bengaluru bench of the National Company Law Tribunal (NCLT) on Tuesday allowed bankruptcy proceedings against the firm and appointed an interim resolution professional, suspending the company's board of directors and freezing its assets.
Founder and CEO Byju Raveendran will report to the resolution professional.
NCLT has appointed Pankaj Srivastava as the interim resolution professional.
Byju's had previously sponsored the Indian cricket team.
While Byju's said it is hopeful of reaching "an amicable settlement" with the Board of Control for Cricket in India (BCCI), sources said the company plans to challenge the order before the appellate tribunal, NCLAT.
When contacted, a Byju's spokesperson said: "As we have always maintained, we wish to reach an amicable settlement with BCCI and we are confident that, despite this order, a settlement can be reached.
"In the meantime, our lawyers are reviewing the order and will take necessary steps to protect the company's interests."
Byju's was once valued at $22 billion but reopening of schools after easing of pandemic restrictions led to its unraveling.
BlackRock recently slashed its valuation of $1 billion.
The company's troubles began when it missed financial reporting deadlines two years ago and fell short of revenue projections by more than 50 per cent.
In February, a group of investors in Byju's parent company Think & Lean (T&L), including Prosus and Peak XV, voted to remove Raveendran as CEO during an extraordinary general meeting (EGM), citing allegations of "mismanagement and failures".
Raveendran has denied allegations and disputed the vote's validity.
The investors and founders are separately engaged in a legal battle.
Founders have been battling investors in recent months even as the company saw job cuts and shrinking business.
NCLT invited creditors, employees and vendors to file claims against Byju's.
BCCI and Byju's entered into a 'Team Sponsor Agreement' on July 25, 2019.
According to this agreement, Byju's got the exclusive right to display its trademark/brand name on the kit of Indian cricket team, placing advertisements during telecast of cricket series, and hospitality and non-hospitality tickets for every ticketed match organised by BCCI, according to the NCLT order.
"As consideration, the Corporate Debtor (Byju's) was required to pay a fee to the Operational Creditor (BCCI)," it said.
"The Corporate Debtor was the Sponsor of the Indian cricket team as per the above arrangements and availed the Services for a period up until March 31, 2023."
After March 31, 2022, Byju's made payment in full only against one invoice for India-South Africa cricket series held in June 2022 amounting to Rs 25.35 crore but failed to pay for subsequent invoices.
A bank guarantee of Rs 143 crore was encashed but that was not sufficient to cover the entire amount, it said adding the sponsorship fee for series/tours including that of South Africa, Australia, Sri Lanka and New Zealand, Asia Cup and ICC T20 between August 2022 to January 2023 amounting to Rs 158.9 crore remain unpaid.
"It cannot be disputed that the Corporate Debtor has availed the services of Operational Creditor," the NCLT order said.
"Corporate Debtor had never disputed the fact that it was required to pay the agreed Fee as per the arrangement between the parties.
"However, despite having acknowledged the dues, the Corporate Debtor has failed to pay and instead, the Corporate Debtor repeatedly kept requesting the Operational Creditor for extension of time for payment."
