More Scrutiny for Byju's Rights Issue as Investors Seek SC Intervention

5 Mar 2024 , 02:00 PM

Four investors in the troubled edtech company Byju’s have submitted pleas to the Supreme Court, asking to be heard before the court rules on a plea that is anticipated to be made in opposition to an order from the National Company Law Tribunal (NCLT).

On March 4, MIH Edtech Investments BV, General Atlantic Singapore TL Pte Ltd, Peak XV Partners Investments, and Sofina SA each submitted a separate caveat to the highest court.

On February 28, NCLT instructed the company to hold the cash in an escrow account even though it had granted Byju’s permission to proceed with its $200 million rights issue. Additionally, it requested that Byju’s think about extending the deadline in order to protect the investors’ interests.

Although the National Company Law Appellate Tribunal (NCLAT) is typically the venue for challenges to NCLT’s orders, these investors have taken the extraordinary step of appealing to the Supreme Court. When it comes to accepting pleas against NCLT, the court is discerning.

The investors contended in the NCLT that the company’s action to request a rights issue was unlawful and should be halted. The board of directors, which consists of Byju Raveendran, the company’s founder, Divya Gokulnath, his wife and cofounder, and his brother Riju Raveendran, contended that the investors were putting up barriers for the business.

At an extraordinary general meeting (EGM) held on February 23, Byju’s investors decided to replace the board and remove founder Raveendran from his position as CEO. Until the Karnataka High Court hears the matter on March 13, the ruling will stay pending.

The NCLT issued this ruling on February 27 after hearing from the parties in-depth; however, it has not yet made a decision regarding whether the rights issue might be stayed.

The monies generated through a rights issue remain locked in a ‘separate account’ because of the ongoing disagreement with the investors, according to Raveendran, who has stated that he has been unable to pay salaries to employees.

Sadly, four of our more than 150 investors have acted in a callous manner, making it impossible for us to use the money raised to pay your well-deserved salary. The funds raised through the rights issue are currently locked in a different account at their request,’ Raveendran wrote in a letter to Byju’s staff.

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