Byju's has been accused by four of its investors of using some of the funds raised during the recently concluded rights issue in violation of an National Company Law Tribunal order, a charge denied by the embattled edtech company.
The Bengaluru bench of the tribunal on April 23 deferred to June 6 the hearing of the “oppression and mismanagement plea” filed against the company by investors Peak XV Partners, General Atlantic, Chan-Zuckerberg Initiative and Prosus.
Byju's had not deposited the money it received from rights issue prior to February 27 in the escrow account, the investors alleged during the hearing.
Byju's also allotted shares to those who participated in the rights issue, overlooking the tribunal’s order to maintain status quo as far as the share holding was concerned.
The company vehemently denied the claims and said everything had be done in accordance with law.
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.
While the tribunal initially showed inclination to direct Byju's to file an affidavit, it did not do so since the investors had not filed any application. The investors were directed to file either an application or an affidavit to put their claims on record in a week's time. Byju's lawyers said they would file a response in two weeks from then.
The case has been adjourned to June 6. The Karnataka high court is closed for summer holidays from April 27 to May 26 and lawyers might not be available on these days.
Byju’s mountain of troubles
The development comes as Byju's is facing an acute shortage of funds. Byju's has only paid partial salaries to employees over the past two months with Byju Raveendran, the founder and CEO of the company taking on more personal debt to make monthly payroll.
This comes as the funds raised from the recently concluded rights issue is tied up in an escrow account as per orders from NCLT, till the disposal of the above mentioned case.
The company has also initiated layoffs on phone calls, letting go about 100 to 500 employees without putting them on a performance improvement plan (PIP) or having them serve a notice period. Byju's has laid off over 10,000 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. In the latest development, however, Mohan decided to step down from the position. It is also in talks to divest assets such as Great Learning and Epic.
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