Byju’s goes to Karnataka HC against NCLT order barring second rights issue

In its order on February 27, NCLT directed Byju's not to allot shares to investors participating in the rights issue without increasing its authorised share capital.

Embattled Ed tech company Byju’s has moved the Karnataka High Court challenging the order of the National Company Law Tribunal (NCLT) order restraining it from going ahead with the second rights issue.

The plea is likely to come up for hearing on June 24.

While the orders of NCLT are usually challenged before the National Company Law Appellate Tribunal (NCLAT), the Ed tech company has filed a writ petition in the Karnataka High Court. Writ petitions are usually filed against governmental action when fundamental rights are violated.

According to the HC’s website, the plea was briefly heard on June 18 and 21. However the website indicated that no effective order was passed on these days.

On June 12, the NCLT in Bengaluru directed Byju's to maintain status quo with regard to existing shareholders and their shareholding.

"Status quo with regard to existing shareholders and their shareholding shall be maintained till the disposal of the main petition," the order said.

The order restrained Byju's from going ahead with the second rights issue, which according to the investors commenced on May 13 and was to end on June 13. Byju's has been restrained from utilising any funds that it has so far collected from the second rights issue, the same is to be deposited in a separate account.

The tribunal also directed directed Byju's to file the complete details of the concerned escrow bank accounts from the opening of the right issue on January 29 till date in 10 days from June 12.

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Furthermore, Byju's must file the complete details of the allotment made on March 2 before the increase of authorised share capital." This must include information such as the name of the shareholder, equity shares held on January 27, entitlement as per rights offer and equity shares allotted on March 23; and also equity shares allotted after increased of authorised share capital, the order noted.

The order was passed in an application filed by the investors of the company such as Peak XV Partners, General Atlantic, Chan-Zuckerberg Initiative and Prosus. The investors had filed a plea in the NCLT to halt Byjus' second rights issue as it would further dilute their holding in the company.

In its order on February 27, NCLT directed Byju's not to allot shares to investors participating in the rights issue without increasing its authorised share capital. The company was also asked to keep the proceeds of the rights issue in an escrow account to protect investors’ right.