Byju’s executive, business partner found in Contempt of US Court

A top executive of troubled Indian tech firm Byju’s and an ally of the company’s founder were found in contempt of court and now face financial sanctions of $25,000 a day for refusing to comply with a US court order, a judge ruled Wednesday.

Byju’s manager Vinay Ravindra and company ally Rajendran Vellapalath failed to answer questions about their roles in stripping software, cash and other assets from Byju’s US businesses that are under court supervision, a federal judge in Delaware found.

In addition, Vellapalath’s tech business, Voizzit Information Technology, violated the court order by filing a lawsuit in India in order to take control of assets owned by Byju’s education businesses in the US, the judge found. Because those units — Epic! Creations and Tangible Play — are under the supervision of a US bankruptcy court, it is a violation of US law to try to seize their assets, even if the action takes place in foreign court.

It is at least the third time that a US judge has found a member of the inner circle of company founder Byju Raveendran of violating a court order in the long-running dispute between the education technology firm and lenders owed more than $1.2 billion.

Last year, Raveendran’s brother, Riju Ravindran, and hedge fund founder William C. Morton were sanctioned for refusing to answer questions about $533 million of loan proceeds that lenders have been trying to track down. They were able to avoid penalties, partly by appearing in court.

Vellapalath and Voizzit will try to resolve the contempt order immediately, their attorney, Maureen Abbey Scorese said in an emailed 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,” Scorese said. “The entities in question are established, reputable companies, and we hope that the business operations will be back on track soon.”

A representative for Byju’s did not return a request for comment on the part of the ruling that involved Ravindra.

Contempt of court motions are uncommon in federal court because most defendants comply with a judge’s orders to avoid expensive, daily penalties. Such actions are even more unusual in US bankruptcy court.

“These are certainly rare circumstances,” US Bankruptcy Judge Brendan Linehan Shannon said in making his ruling.

US lenders are fighting to liquidate US education software companies that Byju’s purchased a few years ago for $820 million. Byju’s, founded by controversial entrepreneur Byju Raveendran and his family, is in bankruptcy in India after defaulting on the debt it owes US lenders.

A business court in India handed the lenders a victory Wednesday when it returned the lenders agent, Glas Trust Co., to an influential creditors committee in that insolvency case. The court also found that a court-approved restructuring official had wrongly thrown Glas Trust off the committee last year and said the official should be investigated.

“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,” lenders said in an emailed statement.

Read More: Byju’s Founder Told Ally to Flee the US to Avoid Testifying

Last year Vellapalath appeared in US court by video from Dubai and claimed that Voizzit actually owns Epic! and Tangible Play, not Byju’s. Voizzit loaned Byju’s more than $100 million in 2023 and therefore had the right to take ownership of the units, according to Vellapalath.

The federal judge overseeing the Epic! bankruptcy rejected that argument, saying he did not “find Mr. Vellapalath to be credible.”

In past responses to lender allegations, Raveendran has denied any wrongdoing, saying his actions were a justified response to overly aggressive tactics used by creditors who specialize in squeezing money out of distressed companies.

Lenders claim Raveendran hid $533 million in loan proceeds that should have been repaid to creditors.