Byju's Founder to Appeal $1B+ Bankruptcy Case Order

Byju’s Founder Contests $1.07 Billion Court Order

Byju Raveendran, the founder of the Indian edtech company Byju’s, has strongly objected to an order issued by a U.S. bankruptcy court. The order mandates he pay over $1.07 billion. He maintains his innocence, asserting that lenders intentionally misled the court and intends to formally appeal the decision.

Details of the Bankruptcy Court’s Ruling

The judgment in Delaware was a default ruling, issued after Raveendran was found to have repeatedly disregarded court directives. He also provided responses deemed “evasive” and “incomplete” concerning approximately $533 million reportedly transferred from Byju’s U.S. division in 2022, funds which were never returned.

Furthermore, the judge referenced concerns regarding a separate limited-partnership stake, later assessed to be worth around $540.6 million. This ruling, dated November 20, originates from legal action initiated by lenders seeking to reclaim funds associated with a $1.2 billion term loan extended to the edtech firm in 2021.

Lenders’ Lawsuit and Byju’s Response

In April of this year, a consortium of U.S. lenders, spearheaded by GLAS Trust, filed a lawsuit against Raveendran and his wife, Divya Gokulnath – Byju’s co-founder – in the Delaware bankruptcy court. The suit concerned the aforementioned missing $533 million.

The couple refuted any wrongdoing at the time, alleging that the lenders were attempting a hostile takeover of the company. They subsequently announced plans to pursue a $2.5 billion lawsuit against GLAS Trust and other parties in India and other legal venues, though no official filing has been made public to date. This action supplemented a complaint Byju’s submitted to the New York Supreme Court, contesting the acceleration of the term loan in 2023.

Pattern of Noncompliance Cited by the Court

The court’s recent order followed a hearing on September 29 regarding the default request. During the hearing, the judge highlighted a prolonged pattern of non-adherence to court procedures. Raveendran reportedly missed hearings, failed to meet extended deadlines, and disregarded a previous contempt order that imposed daily sanctions of $10,000, which remain unpaid.

U.S. Bankruptcy Judge Brendan Shannon characterized the relief granted in the case as “extraordinary,” stating that the “circumstances… are, frankly, unique” and warrant such a measure. The judge has allotted seven days for the involved parties to respond to the ruling.

Raveendran’s Legal Team Responds

“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,” stated J. Michael McNutt, senior litigation advisor at Lazareff Le Bars, representing Raveendran. “The court, in our view, ignored relevant facts.”

Raveendran’s legal representatives contend that the judgment was issued without affording him a proper opportunity to present a defense, instead relying on a prior contempt order. They also argue that the ruling did not acknowledge GLAS Trust’s awareness that the Alpha loan funds were not utilized for the personal benefit of Raveendran or other founders, but rather for Think & Learn, the parent company.

Future Legal Actions Planned

Counsel for Byju’s indicated that the founders are preparing to file claims against GLAS Trust and others in multiple jurisdictions, potentially seeking damages exceeding $2.5 billion. These filings are anticipated before the end of 2025, barring a settlement.

A Dramatic Turn for the Edtech Giant

Despite these planned actions, the default judgment represents a significant setback for Raveendran and his company. Byju’s was once India’s most highly valued startup, boasting a $22 billion valuation and attracting investment from prominent global firms like Tiger Global, the Chan Zuckerberg Initiative, and Prosus.

Currently, the company is grappling with numerous lawsuits, funding shortages, substantial layoffs, and a struggle for control as lenders and creditors attempt to recoup their investments.

Jurisdictional Challenges and Allegations of Misappropriation

Raveendran previously contested the Delaware court’s jurisdiction, but this argument was dismissed in an earlier ruling. The judge asserted that “Raveendran’s conduct that gives rise to the litigation here relates to his activities … in the United States fundraising and serving as a director, officer, or manager of a United States corporation.”

A recent filing in the Delaware bankruptcy case alleged that a substantial portion of the $533 million missing from Byju’s U.S. unit, Alpha, was “round-tripped back to Byju Raveendran and associates.” Raveendran refuted this claim, stating the funds were not used for personal gain.

Ongoing Proceedings in India

Simultaneously, in India, Byju’s is undergoing a court-supervised sale process following the commencement of insolvency proceedings last year. Potential bidders include Manipal Education and Medical Group (MEMG) and Ronnie Screwvala’s UpGrad.