On June 12, the Bengaluru bench of the National Company Law Tribunal (NCLT) issued an interim order preventing ed-tech firm Byju’s from proceeding with its second rights issue for raising funds.
This decision was made by a special coram comprising judicial member SS Sundaram and technical member Manoj Kumar Dubey. The order was in response to a petition filed by four investors—MIH EdTech Investments (a subsidiary of Prosus NV), General Atlantic Singapore, Peak XV Partners Operations LLC, and Sofina—who alleged oppression and mismanagement by Think & Learn Pvt Ltd, the parent company of Byju’s.
The tribunal’s interim order restrains Byju’s from continuing with its second rights issue until the main petition by the four investors is resolved. Additionally, the company was instructed to maintain the current status quo regarding existing shareholders until the final decision is made.
“This Tribunal hereby restrains Byju’s from going ahead with the present rights issue which is in progress till the disposal of the main petition. They are further directed to keep the amounts collected so far since opening of the second rights issue in relation to this offer in a separate account which should not be utilised till the disposal of the petition. Further, status quo with regard to existing shareholders and their shareholding shall be maintained till the disposal of the main petition,” the order stated.
The investors claimed that Byju’s had breached an undertaking given to the NCLT, recorded in the tribunal’s order of February 27. In that order, Byju’s had assured that no shares would be allotted without increasing the authorized share capital and that the money received from the rights offer would be kept in a separate account until the investors’ plea was resolved.
The investors highlighted that despite this assurance, Byju’s had allotted shares to certain shareholders on March 2 and proposed a second rights issue for new allotments, even while the petition was still pending. The second rights issue had opened on May 13 and was scheduled to conclude on June 13.
Byju’s launched the second rights issue after failing to raise the required funds in the first rights issue, which took place from January 29 to February 28. The investors also argued that there is a Look Out Circular (LOC) against Byju Raveendran, the company’s founder, in a case under investigation by the Enforcement Directorate (ED). Furthermore, they claimed that no board resolution had been passed for the second rights issue to raise funds.
The petitioners contended that the allotment of 8,14,530 additional shares to Riju Ravindran on March 2, 2024, was not permissible and should be annulled. Byju’s countered that the shares were allotted not only to Riju Ravindran but to all eligible applicants within the available headroom, and that the authorized share capital was subsequently increased using their votes to pass the resolution.
The tribunal directed Byju’s to submit complete details of the share allotment made on March 3 before the increase in authorized share capital and the subsequent equity shares allotted after the increase.
The plea will be considered on its merits on July 4.
Senior advocates Sudipto Sarkar and Satish Parasaran, along with a team of advocates, represented the investors. Senior advocates KG Raghavan and Dhyan Chinnappa, along with their team, represented Byju’s and Byju Raveendran, briefed by Saraf & Partners.
