On 17th September, the Supreme Court of India will hear the appeal filed by US-based creditor Glas Trust Company LLC against the National Company Law Appellate Tribunal (NCLAT) decision that stayed insolvency proceedings against the ed-tech firm Byju’s. The NCLAT had also approved Byju’s Rs 158.9 crore settlement with the Board of Control for Cricket in India (BCCI). Once valued at USD 22 billion, the ed-tech firm is now struggling to manage its finances.
In the last hearing, the three-judge bench led by Chief Justice DY Chandrachud, along with Justice JB Pardiwala and Justice Manoj Misra, agreed to hear the case after Byju’s lawyer, senior advocate NK Kaul, and BCCI’s lawyer, Solicitor General Tushar Mehta, requested an urgent hearing due to subsequent developments in the case. As another plea related to the case was scheduled for 17th September, Kaul suggested that both matters be heard on the same day.
Chief Justice Chandrachud accepted the suggestion. Notably, the appeal filed by Glas Trust Company LLC originates from a prior ruling where the NCLAT approved the settlement between Byju’s and BCCI while setting aside insolvency proceedings initiated by the Bengaluru bench of the National Company Law Tribunal (NCLT). The matter was related to a Rs 158.9 crore payment default linked to a sponsorship agreement between the cricket board and the ed-tech firm.
The Supreme Court stayed the NCLAT’s decision, describing it as unconscionable, and instructed the BCCI to hold the settlement amount in a separate escrow account until further notice.
Another layer of complications amid court ruling in the US
As the court hearing is scheduled for Tuesday, developments in the US have added another layer of complexity to the financial troubles of Byju’s. On 10th September, Delaware court ruled to place several Byju’s units, including Neuron Fuel Inc., Epic! Creations Inc., and Tangible Play Inc., into involuntary Chapter 11 bankruptcy after these units failed to provide requested financial information to their creditors. According to Byju’s Interim Resolution Professional, Pankaj Srivastava, the decision, made as a default judgment, has been described as “surprising” and “in conflict” with the insolvency proceedings happening in India against Byju’s. He has sought to stay the effect of the US bankruptcy ruling.
Notably, in June this year, US creditors led by HPS Investment Partners claimed that Byju’s founder, Byju Raveendran, violated debt contracts by allegedly withholding financial details about the units. Responding to the allegations, Judge Brendan Shannon granted the creditors’ request to appoint an independent Chapter 11 trustee to manage these units. The parallel insolvency proceedings in the US and India have complicated the legal landscape for Byju’s, as it must navigate cases occurring thousands of kilometres apart under different sets of laws that are likely to cause conflicts at some point.
The units linked to Byju’s have opposed the forced bankruptcy, arguing that the creditors did not have the legal standing to initiate such proceedings. They also accused the creditors of using the filings as a tactical manoeuvre to gain an advantage in related litigation against the ed-tech firm. Despite the objections raised by the units, the US court decided against them, increasing the challenges faced by Byju’s in managing its global operations and financial obligations.
The rise and fall of Byju’s
In 2023, Byju Raveendran’s net worth was Rs 17,454 crores, or USD 2.1 billion, making him one of the world’s wealthiest individuals. However, in 2024, the Forbes Billionaire Index reported that his net worth had dropped to zero. To understand what happened with Byju’s, it is essential to learn how the company rose quickly to fame.
Byju’s was established in 2011 and swiftly rose to become India’s most valuable startup, achieving a peak valuation of $22 billion in 2022. Raveendran’s brainchild disrupted the education sector with its innovative learning application, catering to students from elementary school to MBA level. However, recent financial disclosures and mounting controversies have severely impacted the company’s prosperity.
Slowly and steadily, Byju’s captured the ed-tech market by solving a “problem” in the education sector that actually never existed. However, when COVID-19 hit the world, and Indians, like people everywhere, were forced to stay at home, Byju’s saw an opportunity to make it big.
Relentless advertisements, unrealistic sales targets for representatives, and parents’ desperation to prevent their children’s academic year from going to waste provided a clear but questionable path for Byju’s education programmes.
In September 2021, it was revealed how Byju’s sales representatives were trapping parents just to meet their targets. Parents were pressured to take loans from private firms without verifying their ability to repay, especially at a time when the majority of the workforce was without work.
Sales executives trap vulnerable parents in guilt
Reports suggest that sales representatives or business development executives (BDE) use guilt-trap techniques to trap poor and illiterate parents in buying the packages. According to an article published in The Morning Context by the title “How Byju’s catches parents”, the author narrated the whole process by which the sales representatives allegedly trap the parents.
The sales executives reportedly often use hard-sell tactics. Approaching anyone and everyone they come in contact with to register for the app and keep using it beyond the 15-days free trial period. The overworked, and over-pushed sales team has to spend long working hours to meet unrealistic targets. Often, it is the lower middle class and uneducated parents who end up taking loans after listening to a sales exec narrate how their child will face a dark future if they do not sign up for the learning app.
The loan trap
Another problem with Byju’s was that it offers loan options via two partners. In some cases, they allegedly did not reveal to the parents that the EMI option they are taking would be via a loan that would be taken in the name of the parents. If a parent fails to pay EMI, the loan company starts to threaten them to repay the loan. It also adversely affects the CIBIL score of the parents. In case someone wants to cancel the subscription to the course, it can only be done in the first 15 days. If a student stops using the app after few months, the parents have to pay the remaining EMIs as Byju’s has already got its money and the liability of repaying the loan is on the parents.
In India, with a 1.3 billion-plus population scrambling for resources, competition is always severe. In the hustle to ensure a better job, a better life for their children, parents spend a lot of their hard-earned money on coaching classes, private tuition. An entire industry in India flourishes in the name of private coaching, which is beyond the regular academic hours, just to prepare students for the competitive and entrance exams. With the advent of technology and internet connectivity, the private tuition industry has now evolved into the vast ed-tech industry where millions of children and parents are joining a mad rush to get ahead of each other.
The exploitating company rose and fell too quickly
Despite several exposés, the exploitation by Byju’s sales representatives continued. Meanwhile, Byju’s kept acquiring smaller ed-tech companies. It is unclear whether this was a tactic to eliminate competition or if Byju’s aimed to implement techniques from these companies. By the time the relentless ad spending and other factors took effect, schools had reopened. There was a sharp decline in the number of parents opting for Byju’s classes, as their children were now attending regular schools.
The company, which expected to earn Rs 10,000 crores in 2021, failed to deposit TDS with the government despite deducting it from employees’ salaries, as reported in 2024. In a matter of 24 months, the company lost 90% of its valuation due to poor decisions and sudden changes in the education sector.
BCCI dragged Byju’s to court over non-payment
In November 2023, the Board of Control and Cricket in India (BCCI) moved the National Company Law Tribunal (NCLT) against Byju’s over pending dues related to the sponsorship of the Indian cricket team. Byju’s was a partner of the Indian cricket team since 2019 and its branding has been featured on the team’s jersey. Byju’s sponsorship rights with BCCI were extended in June 2022 and ended in November last year. The company had reportedly asked the board to encash Rs 140 crore bank guarantee and the remaining Rs 160 crore was to be paid in installments.
Reports quoting sources in the BCCI cited that the board confirmed the development but added that they have not arrived at any solution. Along with BCCI, Byju’s also had branding partnerships with International Cricket Council (ICC) and FIFA. All three were up for renewal this year but the company confirmed that it would not renew any partnership.
NCPCR’s notice to Byju’s
In December 2022, the apex child rights body National Commission for Protection of Child Rights (NCPCR) summoned CEO Byju Raveendran over allegations that it is indulging in malpractices to lure parents and children to buy their courses. The Commission urged asked the CEO to appear in person before it with information about all of the courses that BYJU’s offers to children, including information about their course structure, fees, the number of students who are currently enrolled in each course and details of its refund policy.
“The Commission is in observance that indulging into malpractices to lure the parents/children into entering loan-based agreements and then causing exploitation is against the welfare of children and in pursuance of the functions and powers under Section 13 and 14 of CPCR Act, 2005, the Commission requires you to appear in person before it along with the details of all the courses run by BYJU’S for children, the structure of these courses and the fee details, the number of students currently enrolled in each course, the refund policy of BYJU’S, the legal documents regarding the recognition of BYJU’S as a valid ed-tech company and all other relevant documents regarding the claims made in the news report at 1400 hours on 23.12.2022 to explain the discrepancies in relation to the said matter,” the order by NCPCR said.
Byju’s vacated all but one offices
In March 2024, the company finally vacated all offices except its Bengaluru headquarters, where 1,000 employees continued to work. It mandated its employees to work from home. Although the company shut its offices, around 300 of its tuition centres for students of classes 6-10 continued to operate.
The decision to vacate the offices came at a time when the company was facing legal disputes worth USD 1.2 billion with its creditors and was experiencing a severe liquidity crisis. Notably, by that time, Byju’s had laid off thousands of employees over the years and had defaulted on paying full salaries to its employees for February 2024. Interestingly, it was reported that a day before vacating the offices, Byju’s partially disbursed pending salaries of 20,000 employees for the month of February.
Removal of Byju’s founder
In January 2024, major stakeholders of the company voted to remove Byju Raveendran from his position as Chief Executive Officer (CEO) and stripped him of his authority. The decision was made during an extraordinary general meeting, which Raveendran and his family members did not attend.
Byju Raveendran contested his ouster, claiming that the resolution was passed during an extraordinary general meeting attended only by a “small cohort of select shareholders.” Additionally, in a statement, the company said, “Byju’s firmly declares that the resolutions passed during the recently concluded extraordinary general meeting… are invalid and ineffective.”
The founder and former CEO, Byju Raveendran, lost support from major investors following a series of crises, including Deloitte’s resignation over corporate governance concerns and a legal dispute with lenders in the United States.
ED’s action against Byju’s
In february 2024, the ED’s Bengaluru unit, which was looking into possible violations of the Foreign Exchange Management Act (FEMA), concluded that Raveendran needed an LOC to prohibit him from leaving the nation. The last three years have primarily been spent by Raveendran travelling back and forth between Delhi and Dubai. Those with insight into the situation asserted that he visited Bengaluru earlier this week. Raveendran was in Delhi last week for a work trip, based on the aforementioned sources who informed the news agency. Speaking to The Economic Times, Raveendran claimed he is in Dubai at the moment. He had earlier in the week departed for the emirate and stated that he “will be travelling to Singapore tomorrow”.
One of the individuals mentioned previously alleged that the decision to apply to the BOI for the LOC was made with the “interest of investors” in mind. Once the LOC is issued, even if Raveendran is abroad, he will not be permitted to leave the nation after he comes back, per a top government official. The person noted, “The LOC, once opened, will ensure that the interest of investors is safeguarded and the case is taken to its logical conclusion without any difficulty.”
Think & Learn Pvt Ltd, the parent company of Byju and Raveendran, was served with show-cause notices by the agency in November of last year about suspected FEMA violations totalling Rs 9,362.35 crore. In a statement at the time, the ED stated that inquiries had been conducted in response to many allegations about Byju’s foreign investment and its business practices.
The ED had highlighted, “The company was also stated to have made significant foreign remittances outside India and investments abroad which were allegedly in contravention of provisions of FEMA, 1999, and caused loss of revenue to the government of India.” Over the course of April 27 and 28, of last year, the agency searched Byju’s facilities as well as Raveendran’s house. Documents relating to both domestic and foreign investments made by the company were seized.
On the side lines of what was happening with the company, an incident caught the eyes of everyone when a family took away TV installed in Byju’s office after the company refused to refund for a learning program. According to media reports, the family seen in the video requested a refund for a tablet and a learning program that they took for their son but did not utilise. After weeks of trying to get their money back and failing miserably to get past the numerous obstacles, the irate family barged into the office of the edtech company and took away the TV that was installed there. While leaving the premises with the TV the male in the video told an office staff to take the TV back once his refund was paid.
