US lenders to Byju's were removed from an influential creditors committee by a court-appointed arbitrator in India, a victory for the struggling online-education company over creditors trying to collect more than $1.2 billion.
The removal is a setback for the lenders, represented by their trustee, Glas Trust, in their long-running court battle with the startup. Glas Trust has been the most vocal opponent of a settlement agreement Byju's struck to end a bankruptcy proceeding in India.
The decision stripped lenders of a chance to vote on who should run Byju's while it is in bankruptcy in India, the lenders said in a statement. Pankaj Srivastava - appointed earlier this year as Byju's Interim Resolution Professional - ruled that Glas Trust can't join the creditors committee because Byju's claims that many of the lenders are not authorized to hold the debt. Byju's has long argued that any investor who is primarily a distressed debt specialist is barred under the debt contract from being a lender.
The lenders accused Srivastava of "secretly plotting to reject" their claims and of manipulating the creditors' votes by excluding them.
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Before the US lenders even learned that they had been removed, Srivastava held a meeting of the creditors committee and was selected as a "permanent resolution professional," the lenders alleged in an emailed statement. Srivastava didn't respond to an email sent for comment.
"Pankaj Srivastava's actions are unprecedented and entirely illegitimate as no interim resolution professional in the history of the Insolvency and Bankruptcy Code of India has ever attempted to unlawfully strip financial creditors of claims of this magnitude," the lenders said.
Lenders have been trying to force Byju's into an insolvency proceeding in a court in India for months, but with limited success. One part of that court fight is now before India's Supreme Court.
Byju's struck a deal with an Indian creditor - the country's cricket governing body - to escape insolvency. Glas Trust has filed a petition to void the agreement, arguing that it deserves to be paid first. Srivastava's decision could help Byju's argue that the Supreme Court should allow settlement to proceed.
In the US, the lenders have been trying to track down $533 million that Byju's founder, Byju Raveendran, allegedly said was so well hidden that no one would ever find it, according to court documents.
Byju's faces a fraudulent-transfer lawsuit in a US bankruptcy court related to the missing $533 million. That case involves Byju's Alpha, a shell company created by Byju's to tap US capital markets. After Byju's defaulted, lenders seized control of the shell company, put it under court protection and sued to get the $533 million they claim should go to them.
The US bankruptcy case is BYJU's Alpha Inc., 24-10140, US Bankruptcy Court District of Delaware (Wilmington).
