The National Company Law Tribunal (NCLT) on February 27 reserved judgement on interim orders in the oppression and mismanagement plea filed by four investors against edtech company Byju's.
The investors had sought for a stay of a $200 million rights issue that is expected to close on February 29. They alleged that they were being forced to participate in the rights issue as their shareholding would be reduced if they don't.
The tribunal has directed the parties to file written submissions of their contentions in three day and has also issued notice to Ministry of Corporate Affairs (MCA) and Registrar of Companies (ROC).
The investors 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 status quo of shareholding and a complete disclosure of information by the company.
During a hearing that went on for close to five hours, 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.
According to the NCLT's website, the investors have filed a plea against 12 entities and persons including the company's founder Byju Ravindran, his wife Divya Gokulnath and his brother Riju Raveendran.
The investors eventually also want to appeal that the founders as unfit to run the company, appoint a new board, declare the rights issue as void, conduct a forensic audit, among other reliefs.
The NCLT plea by investors came an evening before an extraordinary general meeting held on February 23, where investors like Prosus, General Atlantic and Peak XV voted to fire Raveendran.
Investor sources told Moneycontrol that shareholders of about 60 percent stake in Byju's voted in favour of the resolutions, but company sources argued that those in favour of the resolutions only hold about 47 percent of the shares.
Other NCLT pleas against Byju's
Board of Control for Cricket in India (BCCI), France-based Teleperformance Business Services, and digital marketing firm Surfer Technologies have all filed separate insolvency pleas against Byju's. The NCLT has issued notice in all the insolvency petitions filed against the ed tech giant.
US based non-bank loan agency Glas Trust Company, is the administrative agent for the lenders and collateral agent for the secured parties, has also filed an insolvency plea against the company. The company represents foreign lenders, who collectively extended more than 85 percent of Byju’s $1.2-billion lending.
Byju’s mountain of troubles
The company has laid off thousands of employees in the last 12 months as it battled a double blow of drying venture capital funding and slowing demand for online learning services. Since then, its investor board members have left too, citing differences with Raveendran.
The company has tried to fix some of the problems since then. Its early investor Ranjan Pai ploughed in the capital, it set up an advisory council with veterans such as Mohandas Pai and Rajnish Kumar and elevated Arjun Mohan as CEO. It is also in talks to divest assets such as Great Learning and Epic.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
