Supreme Court STOPS Byju's Foreign Asset Sale! EY India Chief & RP Face Contempt Questions

Supreme Court Halts Contempt Proceedings in Byju's Asset Sale

The Supreme Court of India has intervened in a contentious legal battle concerning Byju's foreign subsidiaries by staying a Kerala High Court order. This order had compelled Ernst & Young India Chairman Rajiv Memani and Byju's Resolution Professional Shailendra Ajmera to personally appear before the High Court in a contempt of court case. The case stemmed from the attempted sale of Byju's overseas assets, specifically Epic! Creations Inc. and Tangible Play Inc.

Questioning the Contempt Basis

A bench comprising Justices PS Narasimha and Atul S Chandurkar raised significant questions about the validity of the contempt proceedings. The judges pointed out that the injunction order, allegedly violated, was only in effect for a brief six-day period between May 21 and May 27, before it was subsequently varied by the Supreme Court itself. "Where is the question of contempt then?" the bench observed, implying that no contempt could arise from breaches occurring outside this narrow window.

Background of the Dispute

The Kerala High Court had previously issued an injunction restraining the US Chapter 11 Trustee, Claudia Springer, from selling assets belonging to Epic. This was in response to an injunction plea filed by Voizzit Technology in an ongoing commercial suit. However, Springer challenged this order before the Supreme Court.

Springer argued that the Kerala High Court's order violated principles of natural justice and judicial comity, and that it exceeded the court's supervisory jurisdiction. She was appointed as the Chapter 11 Trustee for Epic, Tangible Play Inc., and Neuron Fuel Inc. by the Delaware Bankruptcy Court in the United States. The US court had already approved the sale of Epic's assets to Hy Ruby Limited on May 20, 2025, a day before the Kerala High Court issued its restraining order.

US Court Orders and International Conflict

This situation highlights a conflict between Indian and US legal jurisdictions. The Delaware Bankruptcy Court had previously issued multiple restraining and contempt orders against Voizzit and its managing director Rajendran Vellapalath for attempting to assert ownership over assets through parallel Indian proceedings, which violated the automatic stay under US law. Springer contended that the Kerala High Court's intervention effectively rendered the US court's orders unenforceable and jeopardized the restructuring process.

Voizzit Technology subsequently filed a contempt petition in the Kerala High Court over alleged violations of earlier orders, leading to the summoning of Memani and Ajmera. The present appeal before the Supreme Court is a consequence of this development, with the apex court now staying the High Court's direction.

Impact

• This Supreme Court stay provides temporary relief to Ernst & Young India's Chairman and Byju's Resolution Professional, easing immediate legal pressure.
• It potentially clears a hurdle for the planned sale of Byju's foreign subsidiaries, Epic! and Tangible Play, which is crucial for the company's restructuring efforts.
• The ruling underscores the complexities of cross-border insolvency and asset sales, especially when conflicting court orders are involved.
• It may influence investor sentiment towards Indian edtech companies and startups facing financial distress and complex legal challenges.
• Impact Rating: 7

Difficult Terms Explained

• Contempt of Court: Disobeying a court's order or showing disrespect to the court's authority.
• Stay Order: A temporary suspension or halt of a legal proceeding or a court's decision.
• Injunction: A court order that prohibits a party from performing a specific act.
• Varied: Modified or changed by a higher authority.
• Chapter 11 bankruptcy: A legal process in the US that allows a business to reorganize its debts while continuing operations.
• Debtor-in-possession: A company that continues to operate its business under court supervision during a Chapter 11 bankruptcy proceeding.
• Alienating Assets: Selling or transferring ownership of assets.
• Principles of Natural Justice: Fundamental rules of fairness in legal proceedings, such as the right to be heard.
• Judicial Comity: The principle of mutual respect and deference that courts of different jurisdictions show towards each other's laws and decisions.
• Article 227: A provision in the Indian Constitution that grants High Courts supervisory jurisdiction over all subordinate courts and tribunals.
• US Chapter 11 Trustee: An individual appointed by a US bankruptcy court to manage the assets of a company undergoing Chapter 11 proceedings.
• Automatic Stay: A legal injunction that automatically takes effect when a bankruptcy petition is filed, preventing creditors from taking further action against the debtor's assets.
• Restructuring Process: The process of reorganizing a company's debts, operations, and management to improve its financial health.
• Contempt Petition: A formal legal application requesting that a court hold a party in contempt for failing to comply with an order.