BYJU’S insolvency resolution professional (IRP), Pankaj Srivastava, has removed Glas Trust Co, a consortium of US-based lenders, from the committee of creditors (CoC) overseeing the troubled edtech startup’s bankruptcy proceedings. This decision came after Srivastava determined that Glas Trust did not meet the minimum 51% threshold of lenders required in the $1.2 billion Term Loan B (TLB) consortium.

IRP Moves and Legal Actions

During the first CoC meeting held on August 3, Srivastava made the contentious decision to disqualify Glas Trust. This move led Glas Trust to file a petition with the Bengaluru bench of the National Company Law Tribunal (NCLT) on August 30, seeking Srivastava’s removal as the IRP. The petition alleges that Srivastava failed to adhere to bankruptcy regulations, including the requirement to convene the first CoC meeting within seven days of the committee’s formation. The matter is scheduled for a hearing on September 4.

Lender Disqualification and Disputes

Reports suggest that BYJU’S has disqualified several lenders represented by Glas Trust, invoking its right under the credit agreement to exclude “predatory lenders focused on distressed debt.” Sources indicate that Glas Trust no longer meets the required criteria to pursue its claims against BYJU’S, as the company argues that the obligation to repay the loan has not been triggered.

A spokesperson for the TLB lenders criticized Srivastava’s actions as “unprecedented” and “illegitimate,” arguing that no interim resolution professional has previously attempted to invalidate creditor claims of this magnitude without substantial justification. They expressed hope that this conduct will not go unchallenged.

Background and Ongoing Issues

BYJU’S, which secured a $1.2 billion TLB in 2021, has faced severe financial strain due to mounting losses and a challenging funding environment. The company halted loan repayments and filed a suit against its creditors. Additionally, US lenders have accused BYJU’S founder and CEO Byju Raveendran of misappropriating over $500 million from the TLB funds, leading to bankruptcy proceedings against BYJU’S Alpha, its American arm.

Further complicating matters, creditors have appealed to the Supreme Court to annul an INR 158 crore settlement between BYJU’S and the Board of Control for Cricket in India (BCCI), which is part of the ongoing insolvency dispute. Last month, the Supreme Court revived the insolvency proceedings, adding to BYJU’S mounting legal and financial troubles.

Once a high-flying unicorn that aggressively acquired companies and expanded during the pandemic, BYJU’S now grapples with a funding crisis, massive layoffs, operational cuts, and a spate of legal challenges.