Source: Entrackr
A US bankruptcy court has ruled that Byju Raveendran, the founder and CEO of Indian edtech company Byju’s, is in contempt of court, in relation to the bankruptcy proceedings of the company’s US-based unit, Byju’s Alpha.
The Delaware court says that Raveendran was in breach of the court’s directives by not delivering important documents and deadlines and that despite giving him many opportunities and several warnings that there were issues.
So the very real consequence of this is that Raveendran is presently being fined $10,000 per day, and this penalty will continue until he fully cooperates and provides the information requested and ordered. The court also said there could be worse consequences if orders are further ignored.
Background of the Case
The Company’s difficulties began when Byju’s Alpha filed for bankruptcy in the US earlier this year. Prior to that, Byju’s Alpha had borrowed $1.2 billion from multiple lenders, including two US-based lenders, Redwood and Silver Point.
The lenders have claimed that the company improperly directed $533 million from the loan to a hedge fund called Camshaft Capital. The lenders believe this money was moved without any consent or explanation. This led the lenders to have serious questions about mismanagement of funds.
Now, these lenders are attempting to recoup the money, as well as seeking accountability from the leadership, including Raveendran, for their `lack of transparency and accountability’
Raveendran’s Explanation
Raveendran said in court that he could not participate in hearings or provide documents because he was dealing with issues in India and Dubai. He also claimed he was prohibited from traveling to the US under a travel ban in the UAE.
But the US court rejected this argument. The US court said being involved in legal proceedings in other countries is not a legitimate excuse to flout court orders in the US.
What does this mean for Byju’s?
This contempt ruling is one more challenge for Byju’s. Previously, once one of the most valuable start-up companies based in India, Byju’s is facing a multitude of challenges:
- Debt
- Exits by investors
- Revenue decline
- Governance issues
This ruling has put additional pressure on Byju’s to resolve its litigation and financial woes in India and worldwide.
Conclusion
The contempt ruling adds to Byju’s ever-increasing troubles by placing more pressure on its leadership to quickly resolve legal and liquidity issues.
