The edtech giant Byju’s has landed in a legal tussle with its term loan lender Redwood over a missed payment of $40 million. The company has filed a lawsuit in a US court against Redwood for allegedly breaching the loan agreement and demanding immediate repayment of the entire $1.2 billion loan.

Byju’s claims that Redwood acted in bad faith and violated the covenant of good faith and fair dealing by accelerating the loan without giving any notice or opportunity to cure the default. The company also alleges that Redwood is trying to extort a higher interest rate and additional fees from Byju’s by threatening to enforce its security interest in Byju’s assets. Byju’s says that it has sufficient funds to repay the loan and that it was unable to make the payment on time due to technical glitches and regulatory hurdles. The company also says that it has offered to pay the overdue amount with interest and penalties, but Redwood has refused to accept it. Redwood, on the other hand, has filed a counterclaim in the same court, accusing Byju’s of fraud, breach of contract and unjust enrichment.

Redwood says that Byju’s has misrepresented its financial condition and business prospects, and has diverted the loan proceeds for purposes other than those agreed upon. Redwood also says that Byju’s has failed to provide adequate financial information and collateral as required by the loan agreement. The legal dispute between Byju’s and Redwood comes at a time when the edtech sector is facing a slowdown in funding and growth amid the Covid-19 pandemic. Byju’s, which is valued at $16.5 billion, is one of the most funded edtech startups in the world, having raised over $3 billion from investors like Naspers, Tiger Global and SoftBank.

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