A court-appointed agent pushed Byju's, one of India's top edtech startups, into bankruptcy in the US after it defaulted on $1.2 billion in debt.

According to court filings filed by Byju's Alpha Inc. CEO Timothy Pohl, the unit doesn't have enough money to fight its parent firm over debt. The Chapter 11 petition stated that Byju's Alpha's lenders demanded bankruptcy before funding.

As per the statement, the company will sue a small Florida hedge firm for helping Byju's parent hide almost $500 million in payments owed to creditors.

Since breaching conditions on a $1.2 billion loan, Byju's creditors and the online education pioneer have been in a restructuring dispute. The startup skipped a term loan interest payment, one of the largest in the world.

The filing reverses Byju Raveendran's rise from tutor to $22 billion company leader, which charmed investors. As the epidemic boosted commerce, Byju's made acquisitions to expand abroad.

After schools reopened, online tutoring demand fell. Board members have resigned, and Raveendran has committed his home and family members' to pay staff during a cash emergency. To raise funds, the company is selling new stock at at least 90% below its prior investment round.

Byju's Alpha can borrow money to battle the parent business under bankruptcy procedures.

By combining much of the action against the parent firm in Wilmington, Delaware, the US insolvency case may give the lenders a tactical edge in court. The bankruptcy could allow the lenders to sue the parent business for fraudulently transferring over $500 million from Byju's Alpha. Large US company bankruptcies often involve such incidents.

In its bankruptcy petition, Byju's Alpha listed $500 million in assets and $1 billion in liabilities.

Late last year, Byju's lenders won a Delaware court case to appoint Pohl as financing unit director. The lenders and Byju's parent firm have battled allegations in Delaware and Florida courts over the debt default since then.

India received the lenders' insolvency petition last month.