US court rules in Byju's lenders favour, allowing them to take control of a unit

Byju's complaint is rejected by a US court, giving lenders the right to appoint their nominee to the board after a loan default.

Updated on: Nov 10, 2023, 11:36:45 IST

By HT News Desk

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Lenders of tech startup Byju's properly cited a loan default to take control of a unit, a United States court ruled. It said that they had the right to replace a board member with their nominee due to the default, rejecting Byju's complaint. The lenders' chosen director has effectively taken charge of Byju's Alpha.

The Delaware court gave its nod to the Byju's lenders’ appointment of a director for the $1.2 billion borrowed. It also approved the removal of Riju Raveendran, the brother of Byju's founder, from the special purpose vehicle (SPV) board.

“The plaintiffs in this action, Glas Trust Co. and Timothy Pohl, file a complaint against defendants Riju Ravindran, Byju’s Alpha, Inc., and Tangible Play Inc. Plaintiffs seek a declaration that Glas validly removed Ravindran as Byju’s Alpha’s sole director and officer, and that it validly appointed Pohl as Byju’s Alpha’s director and officer, among other things. Following a half-day trial on a paper record, I conclude that Pohl is indeed Byju’s Alpha’s sole director and officer," Delaware chancery court judge Morgan Zurn pronounced in an order dated 2 November, Mint reported.

Glas Trust, representing lenders of a $1.2 billion loan to Byju's, expressed frustration as Byju's failed to secure WhiteHat Jr as a guarantor for the loan. This led to Pohl being named on the board of Byju's Alpha.

Judge Zurn ruled that Glas's actions were valid due to WhiteHat Jr's failure as a guarantor.

In March, Pohl, empowered by lender rights, removed Riju Raveendran from Alpha's board. Byju's countered with a lawsuit in June, calling default claims "bogus" and withholding a $40 million interest payment. Glas Trust later filed a complaint in a Florida court, alleging that Byju's Alpha transferred $533 million to Camshaft Capital Fund to conceal cash whereabouts. Byju’s denies allegations.

The legal challenges add to the hurdles faced by Byju's, once Indi’s most highest valued startup.

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