Byju’s legal troubles in the US escalated further after the Bankruptcy Court for the District of Delaware held founder Byju Raveendran in civil contempt for failing to comply with previous court orders related to limited expedited discovery, according to a report published by The Economic Times.
“This court has personal jurisdiction over Raveendran. He shall remit to the clerk of court the sum of $10,000 for each day he remains in contempt of the orders,” the court order read, as seen by the ET.
The judge stated that Raveendran has missed all deadlines, did not show up in court, and failed to provide substantial documents. Hence, he directed Raveendran to comply with the discovery orders.
According to the US legal terminology, ‘discovery’ refers to the process through which parties exchange evidence and relevant information before a trial.
“I have seen a lot, but I have not seen strategic and patterned failure to provide meaningful, substantive responses to very basic and cogent questions that have gone on for more than a year,” the judge said, as quoted by the report.
Byju's Response
Responding to the order, J Michael McNutt, Senior Litigation Advisor, Lazareff Le Bars Eurl said that Byju's is aware of the Order for Civil Contempt issued on July 8 after a hearing held in June attended by his recently engaged legal counsel.
"Byju will address the Order in due course and reserves all rights. I wish to make clear that this Order relates only to discovery requested by the opposing parties. Byju contests the jurisdiction of the Court over him and reserves all rights," the advisor said.
The statement added, "...that Civil Contempt Order concerns requests for information that are duplicative of matters already before the Indian Courts. Byju and his counsel are addressing those matters before the Indian Courts as well."
This came after the court had ruled in favour of Byju's lenders in connection with the alleged fraudulent transfer of $533 million out of $1.2 term loan B to crisis-hit edtech major.
Legal Setback in US for Byju's
A group of lenders from the $1.2 billion loan consortium to Byju’s had earlier approached a US court seeking bankruptcy proceedings for three of the edtech firm’s American subsidiaries --- Epic, Tynker, and Osmo. These entities had served as guarantors for the term loan B, which Byju’s secured through it subsidiary, Byju’s Alpha, in 2021.
The lenders are pushing for a court-supervised restructuring under Chapter 11 of the US Bankruptcy Code, even as they remain locked in parallel litigation with Byju’s in US courts over issues surrounding the same loan.
Byju’s had acquired the three subsidiaries prior to taking on the debt and has since struggled to divest them — particularly Epic, which has been on the block for months. However, the long-going disputes with lenders and certain investors stalled potential deals, materialised now.
Prior to this, the lenders also filed a lawsuit in the US against Byju’s founder Byju Raveendran, his wife Divya Gokulnath, and former company executive Anita Kishore. The lawsuit alleged that the trio execute a scheme to hide $533 million in funds from the money they had lent to Byju’s Alpha.
A Delaware Bankruptcy also indicated that multiple fraudulent transfers had taken place at the edtech company. The court found that Raveendran had reportedly violated his fiduciary responsibilities as a director of the US entity, Alpha.
The legal case is part of a wider insolvency and financial debacle: Byju’s US arm filed for Chapter 11 in February 2024, auditors have resigned, the parent firm is under insolvency proceedings in India, with nearly every corner of its governance and expansion plans under scrutiny.
The edtech company, which was once valued at $22 billion in March 2022, has fallen to nearly $1 billion valuation.
