ET Explainer: Why Byju’s pushed for arbitration in BCCI dispute

Troubled edtech firm Byju’s told the National Company Law Tribunal on Wednesday that it had referred its dispute with the Board of Control for Cricket in India (BCCI) to an arbitrator. The company said it’s trying to resolve the matter through negotiations with the cricket governing body.

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Before exploring the potential consequences for Byju’s, let’s first examine the nature of the case and understand why the company is opting for arbitration to resolve the issue.

Background Byju’s is currently having financial difficulties in fulfilling obligations related to its commercial sponsorship of the BCCI. In March 2019, Byju’s entered into a three-year jersey sponsorship agreement with the cricketing body, replacing mobile handset brand Oppo. The agreement was later extended by one year.

Sporting organisations benefit significantly from sponsorships as they bring in substantial funds to aid sports development. Simultaneously, companies gain advertising opportunities and increased market visibility through such sponsorships.

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ET had earlier reported that the edtech company was paying Rs 4.61 crore for each bilateral match held in India, and Rs 1.56 crore for each international match organised by the International Cricket Council (ICC) and the Asian Cricket Council (ACC).However, due to financial challenges and a slowdown in funding, Bjyu’s had to reduce its expenditure on high-cost sponsorships.

BCCI had initiated insolvency proceedings against Byju’s for defaulting on sponsorship dues worth Rs 150 crore. The application was filed by the BCCI against Byjus’ parent company, Think & Learn, under the Insolvency and Bankruptcy Code (IBC), 2016, before the Bengaluru bench of NCLT.

The dispute revolves around the payments from October 2022 to March 2023.

In June 2023, Fantasy gaming platform Dream11 entered into a three-year agreement with the BCCI, securing the sponsorship deal at Rs 358 crore for a total of 150 matches.

Why Arbitration?

Byju’s decision to resort to arbitration for resolving their existing dispute prompts the question: Why is it choosing arbitration to address this matter?

The company said the case involves both legal principles and factual aspects; hence, arbitration is the appropriate means for resolution.

Arbitration is a common approach for settling disputes, particularly in commercial contexts. In contrast to public court hearings, arbitration processes are typically confidential. By choosing arbitration, Byju’s might seek to reduce the impact of the dispute on both its operations and reputation.

The parties in conflict can mutually decide on the arbitrator, who would serve as a judge. This enables them to choose an arbitrator with expertise in the specific subject matter of the dispute. In this instance, it could involve a comprehensive understanding of sponsorship rights and agreements within the realm of sports.

Arbitration facilitates a more timely and confidential process, allowing greater control over the proceedings, and ensures a decisive and enforceable outcome.

Legal battles

The conflict between the BCCI and Byju’s is not the edtech firm’s first legal dispute. The company has faced various allegations and engaged in legal battles in the past.

In November last year, the and its chief executive, Byju Raveendran, regarding alleged violations of the Foreign Exchange Management Act (FEMA), amounting to Rs 9,362 crore.

In 2019, Byju’s was found guilty of misleading advertising by the Advertising Standards Council of India (ASCI). The issue centred on claims of significant improvements in learning without adequate evidence to support them, leading to a violation of ASCI’s code of conduct.

The delay in Byju’s release of audited financial results for the fiscal years 2021 and 2022 prompted lenders to demand early repayment of the $1.2 billion loan secured by the company in November 2021.

In November 2023, the company finally disclosed its delayed audited financials for FY22, revealing a nearly doubled loss from the previous year, and revenue falling 50% short of expectations. Byju’s FY21 financials were filed in 2022 after an 18-month delay, reporting adjusted revenue of Rs 2,280 crore and losses of Rs 4,588 crore.

Outcome

In the legal dispute between the cricket administrator and Byju’s, the BCCI’s counsel denied any negotiations and requested more time to consult with the Board.

The NCLT’s Bengaluru bench said the arbitration application would not impact the ongoing insolvency proceedings, and deferred the hearing to February 7. This extension will allow the BCCI to submit a response to Byju’s objections. The company said it had raised objections to the insolvency petition submitted by the BCCI in September last year.

ET reported that Byju’s is planning to pay the full amount to the BCCI.


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