More trouble for Byju’s: Executives found in contempt of US court, slapped daily fines of $25,000

A US federal judge has found two executives linked to troubled Indian ed-tech firm Byju’s in contempt of court, imposing daily fines of $25,000 for failing to comply with a court order.

Byju’s manager, Vinay Ravindra, and company associate, Rajendran Vellapalath, were found in violation after they refused to answer questions regarding their roles in allegedly diverting software, cash, and other assets from Byju’s US businesses, which are under court supervision, according to a ruling Wednesday by US Bankruptcy Judge Brendan Linehan Shannon in Delaware, Bloomberg reported.

Vellapalath’s tech firm, Voizzit Information Technology, also violated a court order by filing a lawsuit in India to seize control of assets belonging to Byju’s US subsidiaries, Epic! Creations and Tangible Play.

Since those companies are under the jurisdiction of a US bankruptcy court, attempting to claim their assets in foreign courts is unlawful, the judge ruled.

The contempt finding marks at least the third time a US judge has ruled that a close associate of Byju’s founder, Byju Raveendran, has violated court orders amid an ongoing legal battle between the company and lenders owed more than $1.2 billion.

Last year, Raveendran’s brother, Riju Ravindran, and hedge fund founder William C. Morton were also sanctioned after refusing to answer questions about $533 million in loan proceeds that lenders have been attempting to track. They avoided penalties in part by appearing in court.

Vellapalath and Voizzit plan to address the contempt ruling immediately, their attorney Maureen Abbey Scorese, said in a statement.

“Our clients’ intention has always been to act in good faith, and we are taking immediate steps to ensure that any concerns raised by the court are addressed promptly and effectively,” Bloomberg quoted Scorese as saying. “The entities in question are established, reputable companies, and we hope that the business operations will be back on track soon.”

A Byju’s representative did not respond to a request for comment on the ruling against Ravindra.

Federal contempt of court rulings are uncommon, particularly in US bankruptcy proceedings, where defendants typically comply to avoid costly daily fines.

US lenders have been seeking to liquidate Byju’s US education software businesses, which the company acquired for $820 million. Byju’s, once a high-profile Indian startup, has since filed for bankruptcy in India after defaulting on debt obligations to US creditors.

In a related development, an Indian business court ruled in favor of the lenders Wednesday, reinstating their agent, Glas Trust Co., to a key creditors’ committee in Byju’s insolvency proceedings. The court also determined that a restructuring official had improperly removed Glas Trust from the committee last year and ordered an investigation into the official’s actions.

“This ruling upholds the rule of law in India, demonstrates that no one is above being held to account, and helps reaffirm international investors’ confidence in the country’s legal framework,” the lenders said in a statement.

Vellapalath previously testified via video from Dubai, claiming that Voizzit, not Byju’s, owns Epic! and Tangible Play. He argued that because Voizzit loaned Byju’s more than $100 million in 2023, it had the right to take control of the US subsidiaries.

However, the judge overseeing the Epic! bankruptcy case dismissed the claim, stating he did not “find Mr. Vellapalath to be credible.”

Raveendran has denied any wrongdoing, arguing that his actions were a necessary response to aggressive tactics by creditors specialising in distressed companies.