Zee Learn Ltd. said India’s National Company Law Appellate Tribunal (NCLAT) set aside the bankruptcy court’s recent insolvency order against the company.

The development came after the education provider’s suspended director Surender Singh filed an appeal before the NCLAT on 13 February, challenging the National Company Law Tribunal’s (NCLT) 10 February insolvency admission order against the company, Zee Learn’s Company Secretary & Compliance Officer Anil Gupta said in a stock exchange announcement.

The NCLAT’s principal bench in New Delhi on 16 February directed to allow Singh’s appeal and set aside the NCLT order and as a result, the company’s board is "out of suspension" and "stands reinstated," he added.

Yes Bank, the financial creditor of Zee Learn, which is a part of Essel Group and runs chain of K-12 schools, had filed the petition against the company before the Mumbai bench of the NCLT (adjudicating authority), claiming a total default of about 469 crore rupees ($56.64 million).

Zee Learn’s Singh was represented by lawyers Krishnendu Dutta, Utsav Mukherjee, Smriti Churiwal, Jaiveer Kant, Deepti and Palash Singhai.

Yes Bank & others were represented by Ramji Srinivasan, Chitranshul Sinha, Jaskaran Bhatia, Tamanna Malik, Shruti Pandey and Namrata Sarogi.

The NCLAT’s order, which was filed with the stock exchange, details how the drama unfolded and the bankruptcy appellate tribunal’s reasoning for arriving at the verdict.

Below are the key highlights from the order:

The Matter

The adjudicating authority heard the parties on 14 December 2022 and reserved the order. Following this, the corporate debtor (Zee Learn) filed an interlocutory application and sought relief from the tribunal. It was submitted that Yes Bank has already assigned the debt in favor of JC Flowers Asset Reconstruction Company.

The adjudicating authority on 19 January 2023 passed the order, saying that financial creditor is seeking time to file its reply and directed the same be done before the adjourned date by duly serving copy to the other side well in advance. The NCLT listed the matter for hearing on 21 February.

However, the tribunal on 10 February admitted the Section 7 application against Zee Learn.

The Dissent and Defense

Dutta, appearing for Zee Learn’s Singh, contended that there was no occasion for the adjudicating authority to admit Section 7 Application as the corporate debtor had sought relief and the matter was scheduled to be heard on 21 February.

Srinivasan, who appeared for JC Flowers, said there’s no consequence of the debt assignment made to the proceeding and even if the assignee is not brought on record, the adjudicating authority could have pronounced its order well before 10 February since the hearing was completed on 14 December 2022.

The Verdict

The NCLAT said the adjudicating authority should have considered Zee Learn’s appeal after already issuing notice on the application and granting time to the financial creditor to file its reply.

“At this stage when the application has not been considered, we are of the view that it is not necessary for us to express any opinion on the merits of the application, which may prejudice the parties before the adjudicating authority,” NCLAT Chairperson Justice Ashok Bhushan and Technical Member Barun Mitra said in the order.

The NCLAT said the fact that the adjudicating authority itself fixed 21 February as the hearing date on the application in the matter and therefore, it was not appropriate to deliver the order under Section 7 petition filed by Yes Bank.

“We make it clear that we are not expressing any opinion on the merits of Section 7 application and it is open for the parties to raise all submissions as permissible in law,” the NCLAT said.

The bankruptcy appellate tribunal directed the adjudicating authority to consider the matter and pass fresh orders on both the applications in accordance with the law.

“All contentions of both the parties are left open,” it said.

Zee Learn, whose brands include Kidzee Preschool and Mount Litera World Preschool, recently said its Chief Executive Officer Ritesh Handa resigned amid the company’s insolvency process.

(Note: $1 = 82.7972 Indian rupees)

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