Glas Trust ousted from Byju's insolvency case after failing to meet required lender threshold

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Glas Trust Inc, which represents several US-based lenders, has been removed from the Committee of Creditors (CoC) in the ongoing insolvency case against Byju’s. This decision was made by Insolvency Resolution Professional (IRP) Pankaj Srivastava, after determining that Glas Trust no longer meets the requirement of representing at least 51 percent of the lenders.

Insolvency officer Srivastava told Glas in a September 1 letter that a majority of the lenders it was representing have no business rights left as part of agreements with Byju's, and can't stake a claim. In a potential setback for US lenders, Srivastava also asked Glas to clarify its position and "provide supportive documents".

Per sources, Glas Trust has filed a petition against the IRP’s decision in the Bengaluru bench of the National Company Law Tribunal (NCLT). While the specifics of their plea remain confidential, sources indicate that their "disqualification" is central to their challenge.

In parallel, the Supreme Court is hearing Glas Trust’s appeal against the National Company Law Appellate Tribunal (NCLAT) decision, which had previously halted the insolvency proceedings against Byju’s.

The disqualification of Glas Trust could severely undermine the US lenders' position in their pursuit of accelerated repayment of $1.35 billion loan and penalties. As Byju's faces mounting pressure, the legal victory may provide some breathing room for the embattled edtech giant.

Lenders allegation

On September 4, the lenders issued a scathing statement accusing Srivastava of engaging in "fraudulent actions" to unlawfully remove Glas Trust from the CoC.

The lenders allege that Srivastava’s actions are "unprecedented and entirely illegitimate," asserting that no interim resolution professional has ever attempted to strip financial creditors of claims of such magnitude "without any legitimate reason."

They claim that Srivastava, who had previously confirmed Glas Trust's inclusion in the CoC, abruptly changed course, backdating documents and rescheduling CoC meetings "in secret" without informing Glas Trust or its advisors.

"Srivastava’s decision to exclude GLAS Trust from the CoC on the basis of purported disqualification notices is completely wrong in law and in fact, and ultimately utterly irrelevant," the lenders said in a statement.

They argue that Srivastava's actions were designed to "mislead and blindside GLAS Trust and the Lenders," effectively excluding them from participating in critical insolvency proceedings.

The lenders further contend that Glas Trust, as the administrative and collateral agent under the term loan, has a clear contractual mandate to protect the rights of all lenders, whether disqualified or not. "The issue of disqualification does not in any way undermine GLAS Trust’s claim against Think & Learn or change Think & Learn’s financial obligations under its guarantee," the lenders emphasized.

They also accused Srivastava of engaging in a "clear intent to fraudulently disenfranchise GLAS Trust and the Lenders from the CoC."

Byju’s, once a beacon of India’s edtech industry, valued at $22 billion in 2022, is now embroiled in financial distress. The company is locked in a dispute with its US lenders over $1.35 billion in unpaid dues, with tensions exacerbated by recent developments in the insolvency proceedings.

The case centres around Byju's struggle with its US lenders as the company faces ongoing insolvency proceedings. The US-based lenders had objected to the payment settlement between BCCI and Byju's, saying the Rs 158 crore that the latter agreed to pay to the former was “tainted” and stolen from them.

(With inputs from Reuters)