(Bloomberg) -- One of India’s hottest tech companies, Byju’s, asked a New York court to intervene in its dispute with lenders owed more than $1 billion, claiming a group of distressed-debt investors manufactured a fake debt crisis to extort money from the education-technology firm.

In a lawsuit filed Monday — the same day the company refused to make a $40 million interest payment — Byju’s argued that it hasn’t violated its US debt contract, as an agent for the lenders claims. The agent declared a default and demanded immediate repayment of the loan. Byju’s asked the court to dismiss the default.

Byju’s was unable to comply with one term of the debt contract, the company argues, because of a change in Indian financial regulations. Another alleged violation of the terms was never meant to be considered a serious breach of the contract, the lawsuit claims.

The company chalks up its current debt predicament to aggressive distressed-debt investors who, in its view, were never supposed to be able to buy the loan. 

The debt contract prohibits lenders from selling their stakes to anyone on a list of “disqualified lenders” or investors who specialize in distressed debt, according to the lawsuit. Should that somehow happen, Byju’s has the right to force the disqualified lenders to sell back their pieces of the loan for the price they paid, plus certain fees, the company claimed in court documents.

The debt imbroglio has made Byju’s one of the largest Indian startups to miss a payment on a dollar loan. The company had been trying to strike a deal with creditors to restructure the facility, which itself is one of the biggest unrated term loan B offerings ever from a new-age economy company. 

In a letter seen by Bloomberg News, Byju’s accused the lenders’ agent, Glas Trust Company, of negotiating in bad faith. Byju’s offered to make the missed interest payment if Glas would withdraw its demand for $1.27 billion, which is the amount allegedly needed to pay off the loan principal, plus fees and expenses.

‘Bad Faith’

“GLAS’s aggressive and bad faith approach has been driven by certain lenders,” who specialize in buying distressed debt at a discount, Byju’s said in its complaint. Such investors “were never meant to have been lenders at all, and should therefore be disqualified.”

The company also told lenders in its letter that it remains open to negotiations.

Lawyers for Glas did not return emails seeking comment. 

Byju’s is lead by founder Byju Raveendran. Since the company was founded in 2015, Raveendran has attracted capital from some of the biggest investors in the tech world, including Mark Zuckerberg’s Chan Zuckerberg Initiative, Silver Lake Management and Naspers Ltd. Byju’s had allegedly been worth more than $20 billion last year when it considered merging with a special-purpose acquisition company.

The New York lawsuit is Byju’s PTE versus Glas Trust Company, Supreme Court of the State of New York.

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