A Delaware court has ruled for the involuntary Chapter 11 bankruptcy of several units associated with Indian ed-tech giant Byju’s, including Neuron Fuel Inc., Epic! Creations Inc., and Tangible Play Inc. The decision, handed down at a hearing on Tuesday, follows a default judgment after these units failed to provide requested financial information to creditors.
The ruling, which includes the appointment of an independent Chapter 11 trustee to manage the Byju units during bankruptcy, has surprised Indian officials and added complexity to Byju’s already tangled insolvency proceedings. Pankaj Srivastava, Byju’s Interim Resolution Professional appointed earlier this year, expressed his surprise in a letter, labeling the US court decision as “in conflict” with ongoing insolvency proceedings in India. Srivastava is now seeking to stay the effect of the bankruptcy ruling.
The bankruptcy petition was filed by creditors led by HPS Investment Partners in June, who allege that Byju’s founder, Byju Raveendran, violated debt contracts by withholding financial details about the three units. Epic and other Byju units contested the bankruptcy filing, arguing that the lenders lacked the legal standing to initiate it and that the move was a strategic maneuver intended to gain leverage in related litigation.
Byju’s, once valued at $22 billion and a symbol of India’s tech aspirations, has been struggling with financial difficulties following a post-pandemic liquidity crunch. The company faces multiple bankruptcy cases both in India and abroad, with creditors in both countries seeking repayment.
The dispute between the Indian official and US creditors has further complicated the situation. Srivastava’s decision to remove US lenders from a key creditors committee in India has heightened tensions.
As of Friday at noon, it remains uncertain whether the Indian official’s request will alter the US court’s ruling. Byju’s petitioning creditors have disputed the Indian official’s letter and urged the judge to finalize the bankruptcy order. No public update on the judge’s decision has been disclosed yet.
