A federal judge in the United States has determined that two executives associated with the troubled Indian ed-tech company Byju’s are in contempt of court, resulting in daily fines of $25,000 due to their noncompliance with a court order.
Vinay Ravindra, a manager at Byju’s, and Rajendran Vellapalath, an associate of the company, were found to be in violation after they declined to respond to inquiries concerning their involvement in the alleged misappropriation of software, funds, and other assets from Byju’s US operations, which are currently under court oversight. This ruling was issued on Wednesday by US Bankruptcy Judge Brendan Linehan Shannon in Delaware, as reported by Bloomberg.
Additionally, Vellapalath’s technology firm, Voizzit Information Technology, breached a court order by initiating a lawsuit in India aimed at seizing assets belonging to Byju’s US subsidiaries, Epic! Creations and Tangible Play.
The judge ruled that such attempts to claim assets in foreign jurisdictions are unlawful, given that these companies fall under the authority of a US bankruptcy court.
This contempt ruling represents at least the third instance in which a US judge has found a close associate of Byju’s founder, Byju Raveendran, to be in violation of court orders amid an ongoing legal dispute involving the company and creditors owed over $1.2 billion.
Last year, Riju Ravindran, the brother of Raveendran, along with hedge fund founder William C. Morton, faced sanctions for their refusal to respond to inquiries regarding $533 million in loan proceeds that lenders have been trying to trace. They managed to evade penalties, in part, by appearing in court.
Vellapalath and Voizzit intend to promptly address the contempt ruling, as stated by their attorney, Maureen Abbey Scorese.
“Our clients have always aimed to operate in good faith, and we are taking immediate measures to ensure that any issues raised by the court are resolved swiftly and effectively,” Scorese was quoted by Bloomberg. “The companies involved are well-established and reputable, and we are optimistic that their business operations will soon return to normal.”
A representative from Byju’s did not provide a response regarding the ruling against Ravindra.
Federal contempt of court rulings are rare, especially in US bankruptcy cases, where defendants usually comply to avoid incurring expensive daily fines.
US lenders are pursuing the liquidation of Byju’s US education software businesses, which were acquired for $820 million. Once a prominent Indian startup, Byju’s has since filed for bankruptcy in India after failing to meet debt obligations to US creditors.
In a related matter, an Indian business court ruled in favor of the lenders on Wednesday, reinstating their agent, Glas Trust Co., to a crucial creditors’ committee in Byju’s insolvency proceedings. The court also found that a restructuring official had wrongfully removed Glas Trust from the committee last year and mandated an investigation into the official’s conduct.
This decision reinforces the rule of law in India, illustrates that accountability applies to all individuals, and serves to bolster international investors’ trust in the nation’s legal system, according to a statement from the lenders.
Vellapalath had previously provided testimony via video link from Dubai, asserting that Voizzit, rather than Byju’s, is the rightful owner of Epic! and Tangible Play. He contended that Voizzit, having lent over $100 million to Byju’s in 2023, was entitled to assume control of the US subsidiaries.
Nevertheless, the judge presiding over the Epic! bankruptcy proceedings rejected this assertion, indicating that he did not consider Mr. Vellapalath to be a credible witness.
Raveendran has refuted any allegations of misconduct, maintaining that his actions were a necessary reaction to the aggressive strategies employed by creditors focused on distressed assets.
