Byju’s Alpha - Case Update

The High Court has refused to recognise a letter of request from a US bankruptcy judge, determining that the request was essentially a fishing expedition aimed at obtaining information from the respondents rather than evidence for trial.

Byju’s Alpha (Alpha) is an Indian education technology company whose US division filed for Chapter 11 bankruptcy protection in Delaware on 1 February 2024 after its lenders instituted bankruptcy proceedings against it. The main issue in the bankruptcy has been tracing and recovering $533 million in missing lender funds. The lenders allege that the $533 million was transferred offshore to entities linked to the company’s founder, Byju Raveendran. The US Bankruptcy Court has made several key rulings in the Alpha bankruptcy proceedings, including finding director Riju Raveendran (the younger brother of Byju) in contempt and ordering him to pay $10,000 a day until he helped locate the $533 million.

On 2 February 2024, the day after the Chapter 11 bankruptcy filing, Alpha commenced a fraud claim in the US Bankruptcy Court for the District of Delaware (the Delaware Claim) against former executives and entities allegedly involved in the misappropriation of the $533 million.

On 26 June 2024, the supervising judge in the Delaware Claim made a letter of request for the certain respondents to produce documents and/or give sworn testimony for the benefit of the Delaware Claim (the LOR). The respondents to the LOR (the “UK Respondents”) — entities and individuals associated with a UK-based company which operates in the procurement industry — are not parties to the Delaware Claim, but are alleged to have been involved in transactions related to the disputed funds. Alpha argued that the UK Respondents possessed crucial evidence concerning the whereabouts and ultimate recipients of the $533 million.

On 11 July 2024, Senior Master Cook made an order giving effect to the LOR. The UK Respondents then applied to set aside the order. They claimed that Alpha’s request was not genuinely focussed on obtaining evidence for the Delaware Claim but was instead a fishing expedition designed to gather intelligence for future claims against them. The UK Respondents also argued that, since they were not defendants to the Delaware Claim, Alpha could not compel them to produce documents and testimony. They also emphasised that complying with the LOR could expose them to legal liability without them having the procedural protections afforded to named defendants.

The High Court agreed with the UK Respondents. The Court acknowledged that “there need to be good reasons not to accede to a letter of request and that comity requires a high degree of deference to be given to the views expressed by the courts seeking the judicial assistance of the courts of the UK”, and that “this cooperation is of particular importance in the context of international fraud”. However, the Court found that Alpha’s request was primarily aimed at obtaining information to shape potential future claims, rather than evidence relevant to the existing Delaware Claim. Further, compelling the UK Respondents to disclose documents could unfairly expose them to legal risk before any claims are formally brought against them.

As a result, the High Court set aside the previous order enforcing the LOR.

Read the decision here.

Professionals involved:

• Matthew Parker KC of 3VB (instructed by Laytons) for the UK Respondents

• Mark Tushingham of Twenty Essex (instructed by Quinn Emanuel Urquhart & Sullivan) for Alpha