Byju’s founders, led by CEO Raveendran, are preparing to make claims in GLAS Trust. They’ve indicated they want to enforce damages of at least $2.5 billion across multiple jurisdictions. A Delaware bankruptcy judge later issued a default judgment against Raveendran. This breathtaking new step comes on the heels of allegations that he completely ignored court orders in a high-stakes financial scandal.
The legal tumult began when Byju’s took out a $1.2 billion term loan in 2021. This rescue loan has since become the centerpiece of the ongoing insolvency proceedings for the one-time educational technology star. There have been allegations that Byju’s U.S. unit, Alpha, moved $533 million overseas in 2022 without collecting the money owed. The judge’s ruling in contempt found Raveendran’s chronic failure to comply, having missed multiple hearings and defied a previous contempt finding.
Raveendran has issued public denials against allegations that any of the money was used for her personal benefit. Whatever the arguments we’ve made on the merits, his legal counsel is deeply disappointed by the court’s recent rulings. They maintain that Raveendran didn’t have a reasonable opportunity to contest the allegations.
“We consider that the U.S. Court erred in its judgment of this matter and will be filing the necessary appeals and other contestations related to this judgment and related orders,” – J. Michael McNutt
In April, GLAS Trust, the U.S.-based lenders’ representative, filed a suit against Raveendran and his spouse Divya Gokulnath. The implications, including billions in financial stakes, are profound as Byju’s continues its complex court-supervised sale process. The company started these proceedings last year during the most acute phase of its financial struggles that have deeply eroded their share value.
Byju’s a few years ago was valued at $22 billion! It has been the darlings of major investment by global titans like Tiger Global, the Chan Zuckerberg Initiative, and Prosus. Nonetheless, its severe fiscal challenges have resulted in a precarious future. Among early bidders for the company are Manipal Education and Medical Group (MEMG), Ronnie Screwvala’s UpGrad.
The Delaware bankruptcy judge chided Raveendran for a repeated, months-long disregard of written court orders. Perhaps most damaging, the judge focused on Raveendran’s long-past extended deadlines. He pointed out Raveendran’s dereliction in not attending four key hearings for the case.
“The court, in our view, ignored relevant facts,” – J. Michael McNutt
The judge has given both sides a seven day window to appeal the decision. As the situation unfolds, it remains to be seen how Raveendran’s appeal and the subsequent claims against GLAS Trust will impact Byju’s trajectory during this tumultuous phase.
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