BYJU'S co-founder challenges GLAS Trust's authority in insolvency case, calls it 'fraud'
In his petition, Riju Ravindran has alleged that GLAS Trust has "fraudulently represented itself to be a financial creditor" and has requested the National Company Law Tribunal to direct it to "prove its authority to represent the creditors before it".
Riju Ravindran, co-founder and former promoter of Think and Learn, which owns debt-ridden edtech firm BYJU'S, has moved insolvency tribunal NCLT for the removal of GLAS Trust as the financial creditor and from its Committee of Creditors.
In his petition, Ravindran has alleged that GLAS Trust has "fraudulently represented itself to be a financial creditor" and has requested the National Company Law Tribunal to direct it to "prove its authority to represent the creditors before it".
GLAS Trust, which is representing BYJU'S' US-based creditor, has the authority to represent merely 17.38% of the voting rights of the consortium of term loan providers, he submitted.
According to Ravindran, GLAS can take actions on behalf of lenders only if the action is authorised by lenders holding more than 50% of the term loan.
GLAS Trust Company LLC, a US-based firm, is the trustee for lenders to which BYJU'S owes $1.2 billion.
He has requested NCLT to "direct removal of GLAS Trust Company LLC from CoC of Think and Learn forthwith and to, consequently, set aside and declare all decisions taken by the CoC...with GLAS Trust Company LLC, as a member, as nullity."
The matter is scheduled for hearing before the Bengaluru bench of NCLT on Friday.
As an interim measure, Ravindran has also directed NCLT to "stay CIRP of Think and Learn, till the time GLAS proves it has the requisite authority of the qualified lenders under the Credit and Guaranty Agreement dated 24.11.2021 for taking any action under the said agreement."
Ravindran has filed this application in the main petition filed by the cricket body BCCI, on whose plea Corporate Insolvency Resolution Process (CIRP) was initiated against the edtech firm.
He further alleged that GLAS has "fraudulently represented” itself to be a financial creditor before NCLT and obtained several orders based on it.
"This fundamental fraud has been perpetrated upon this tribunal by GLAS by illegally claiming that it has the authority to represent lenders under the Credit and Guaranty Agreement dated 24.11.2021 without possessing the requisite mandate from 51% of qualified lenders," it said.
GLAS' entire edifice of representation crumbles upon examination of the contractual disqualification mechanism that has been validly exercised by the company, resulting in the disqualification of 61.43% of the term loan holders.
"This disqualification has reduced GLAS' actual authority to represent merely 17.38% of the term loan, rendering every action taken by GLAS in these proceedings as ultra vires and void ab initio," it said.
He further alleged GLAS, fully cognizant of its lack of authority, has 'orchestrated' an elaborate conspiracy involving Ernst & Young (EY) and successive Resolution Professionals to manipulate the CIRP process and perpetuate its illegal control over it.
Byju’s Alpha Inc, a wholly-owned US subsidiary of Think and Learn, had availed a loan facility amounting to approximately $1.2 billion under a Credit and Guaranty Agreement on November 24, 2021 from a group of lenders. The agreement was for a period of five years with a maturity date in November 2026 for the term loan under the same.
However, GLAS issued a notice of default and sought to accelerate the term loan on March 2023 within 15 months of the Credit Agreement and 3.5 years prior to the maturity date.
Upon realising that certain lenders had stepped into the shoes of the initial investors in violation of the specific terms of the Credit Agreement, Think and Learn exercised its rights under the agreement to protect itself by issuing a letter of disqualification on June 5, 2023, to Redwood entities.
According to the petition, GLAS claims to be the administrative and collateral agent for the lenders under the Credit Agreement.
GLAS Trust, which had also filed an insolvency plea, claimed that 72.2% of the lenders consented to filing the same.
"It is submitted that out of these 72.20%, 61.43% are disqualified lenders. Therefore, from the lenders who consented (or voted "yes"), only about 10.77% are not disqualified lenders. The percentage of disqualified lenders who consented in proportion to non-disqualified lenders is 6.61%. This would, perforce, mean that GLAS has the authority to represent only 17.38% of the term loan," he said.