NCLT asks Byju's to keep proceeds of rights issue in escrow account, consider extending closure date

NCLT asks Byju's to keep proceeds of rights issue in escrow

The National Company Law Tribunal (NCLT) in its order passed on February 27 has directed ed tech company 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 four of the company's investors.

The tribunal has further 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."

Furthermore, the tribunal has clarified that it has reserved the plea by investors to stay the rights issue for judgment and has directed the parties to file written arguments for the case.

"Two weeks is granted to the Authorities for filing reply from the date of receipt of a copy of the notice and two weeks thereafter for filing response/rejoinder, if any, thereto from the date of receipt of a copy of reply is granted. List the case for further hearing on 04.04.2024,” directed the tribunal in its order which was made available on February 28.

This comes a day after NCLT reserved judgment on interim orders in the oppression and mismanagement plea filed by four investors against edtech company Byju's.

The investors had moved to the NCLT and sought for an interim relief with a stay on the rights issues and encumbering and transferring any assets of Byju’s and its subsidiary. Investors also requested the bench to allow maintenance of the status quo of shareholding and a complete disclosure of information by the company.

During a hearing that went on for close for five hours on February 27, the NCLT witnessed an intense showdown between four investors of edtech giant Byju's and the current board of directors of the company.

The investors alleged that the company's move to call for rights issue is illegal and contrary to law and sought a stay of it, while the board of directors of the company argued that the investors were creating obstructions to the company.

"The board of directors, did not call a general body meeting before rights issues as they are aware that the general body is not in their favour," said the lawyers on the investors behalf.

"If the NCLT passes any order today, it will dilute the order of HC... The investors are not looking at the interest of 100 million students and the 12,000 employees but only at their value maximisation," the company's lawyer asserted.