The National Company Law Tribunal (NCLT) on April 3 placed a plea by the investors to halt the rights issue of the embattled ed-tech company Byju's before the president of the tribunal owing to a difference of opinion between the members of the Bengaluru bench.
The president of NCLT is now likely to allocate the case to a third member of the NCLT to hear the interim application again. NCLT Bengaluru has just one bench and hence a third member from another bench of the tribunal is expected to be allocated the case. NCLT benches usually comprise of a technical member and a judicial member.
On March 29, Byju’s concluded its extraordinary general meeting (EGM) to increase the company's authorised share capital. According to sources, there were no objections to the resolutions discussed at the meeting.
Sources said hours before the EGM, CEO Byju Raveendran told dissenting investors who stayed away from the previous month's $200 million rights issues that they were welcome to participate in it over the next 72 hours. However, none of them participated.
The EGM was held a day after the NCLT refused to defer the meeting despite a plea by dissenting investors such as Peak XV Partners, General Atlantic, and Prosus seeking a stay.
During the hearing on March 28, investors argued that Byju’s did not permit them to conduct an inspection of the documents to decide on how to vote at the EGM. According to the investors, all the shareholders were not served the notice for the EGM, as was required by law.
Despite all these efforts by the management to obtain a legal sanction for its rights issue, the company had not been able to utilise the funds it raised owing to an NCLT order.
In February, NCLT directed Byju's to keep funds received from the rights issue in an escrow account till the disposal of the oppression and mismanagement plea filed by these four investors.
The tribunal had directed Byju's to "consider the extension of the closure date of the right issue so that the rights of the petitioners about the making of applications for shares under their rights entitlement does not get prejudiced".
Raveendran said the company is unable to pay its employees owing to this.
As reported by Moneycontrol on April 2, Byju’s had held back salaries for the second month in a row, awaiting a green signal from NCLT to use funds from the rights issue.
"We are writing to you today with a heavy heart but with a message of hope and reassurance. We regret to inform you that there will again be a delay in the disbursement of salaries," the management said in an email to employees on April 1.
“A few misguided foreign investors in BYJU'S have obtained an interim order in late February which has restricted usage of the funds raised through the successful rights issue. This irresponsible action by the 4 foreign investors has compelled us to temporarily hold the disbursal of salaries until the restriction is lifted,” they added.
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