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Can a US State Decide the Fate of Byju Raveendran and Think & Learn?
Whether a court in Delaware can determine the future of an Indian citizen, such as Byju Raveendran, and an Indian business, such as Think and Learn, or not, is now the subject of a heated discussion in society. It raises a bigger question about jurisdiction, international finance, and sovereign rights.
One of the main facts that people overlook is that Byju Raveendran is an Indian citizen residing in India, and Think and Learn is an Indian firm that is under the control of Indian authorities. This brings us to the fundamental legal issue, why then should a state court in the United States be allowed to exercise jurisdiction over individuals and businesses that conduct their activities within India?
The solution is found in the way the international financing of Byju was arranged. Delaware was selected by lenders, as the US is a place where corporate law is well known, and it does not necessarily make it reach everywhere in India. Also, the Delaware Supreme Court has decided in Genuine Parts Co. v. Cepec (2016) that mere registration in Delaware does not entitle the jurisdiction to needlessly reach into foreign defendants.
Delaware has also passed contempt orders against Byju Raveendran in the current case. However, such orders cannot apply under Indian law since the Indian citizens and Indian companies are subject to Indian courts, such as the Supreme Court of India and the National Company Law Tribunal, first of all. Every country exercises control over what goes on in its borders, and that is a central concept of international law. Similarly, the recent $1.07 billion default judgment issued by the Delaware court against Byju Raveendran does not have automatic recognition or enforceability in India.
To get the complete picture, let’s consider the reasons to create the Alpha SPV, how Delaware was used by lenders and their agents, and why Indian courts are still the rightful decision on the issues related to Think and Learn.
The Role of SPVs for Byju Raveendran’s International Financing
The Special Purpose Vehicles (SPVs) are independent legal entities with the purpose of carrying out certain financial activities. They are so prevalent in business worldwide that companies such as Amazon, OYO, and Paytm employ SPVs in various countries.
Alpha SPV was created by Byju specifically to receive and manage foreign debt through the US-based structure mandated by the Term Loan B (TLB). According to the rules of the Reserve Bank of India, foreign institutional debt cannot enter an Indian company directly without adhering to currency regulations; therefore, using an SPV is necessary for compliance. This structure was created at the inception of TLB, having been arranged by JP Morgan.
It was not a hiding action. The SPVs are entirely transparent financial instruments, and all lenders, such as GLAS, Redwood, and SilverPoint, had approved this structure when they signed the TLB. All the transactions made with Alpha SPV were reported and audited by external auditors. In case Byju Raveendran had sought to conceal funds, the last thing he would do is to apply for a highly regulated SPV under TLB regulations. Thus, the existence of an SPV does not make one suspicious. It is a common trend in the cross-border corporate systems.
GLAS and Delaware: How Foreign Agents Seized Control
GLAS Trust Company is the agent delegated by such lenders as Redwood and Silver Point. It advocates the interests of lenders and is not impartial. It serves as a representative of these funds, most of which are said to be distressed debt investors or vulture funds in their approaches, since their business model tends to entail aggressive litigation to acquire the highest returns.
Lenders and GLAS also appointed restructuring professionals (RPs), among them being Timothy R. Pohl. It is not Byju Raveendran or shareholders of Think and Learn who give them their authority. Rather, it is based on lender control using Alpha SPV.
When he ascended to power, the RPs started creating a story by registering cases in Delaware. They brought their claims at an opportune time when the world was interested in the case. By their submissions, the lenders virtually monopolised the media presentation prior to a complete Indian response being allowed. The background of Redwood Capital and Silver Point is in litigation of a similarly aggressive nature in previous international cases, which makes their approach contextual.
These RPs were then given control of Alpha by the courts of Delaware. But it is not an independent investigation that gives rise to this control; instead, it is lender filings. Meanwhile, Techcrunch reports that Byju Raveendran has appealed US Court, reiterating that such orders cannot automatically bind Indian entities.
The Indian Legal System’s Role in Protecting Startups
The appropriate body of dispute involving Think and Learn in India is the National Company Law Tribunal (NCLT). NCLT is an insolvency, restructuring, and corporate governance firm that is knowledgeable about the Indian regulatory and business climate.
The Supreme Court of India still stands as the supreme court of constitutional affairs. The sovereign legal framework, or the Indian legal structure, places Indian companies and Indian citizens under the jurisdiction of the Indian courts.
This is also the case with the US in the protection of its companies. The Foreign Sovereign Immunities Act (FSIA) restricts the suing of foreign countries in the US. In the same manner, India is justified in restricting the scope of foreign courts on Indian corporate affairs. Other countries, such as the UK and Belgium, have also issued laws to safeguard domestic firms against extreme creditor conduct, including laws against vulture fund tactics.
Think and Learn is already regulated by Indian institutions, including the Ministry of Corporate Affairs and the Reserve Bank of India. This supports the fact that the Indian courts, rather than the Delaware courts, are the appropriate ones to resolve issues touching on the future of the company.
Is This Truly Delaware’s Decision to Make?
Finally, the controversy involving Byju Raveendran extends beyond just a loan issue or corporate structure. The question concerns the legitimate right to determine the future of an Indian citizen and an Indian company. Delaware can be an optimal choice of lenders, but it is not allowed to override the sovereign legal system in India. Alpha SPV is made only to finance; whereas, Think and Learn is well within Indian jurisdiction, and the last word rests with the Indian courts. The case is merely a stern reminder to the world market that national borders and the legal rights of individual people operating in the country should be honored with regard to cross-border finance.