Byju's investors file caveats in SC expecting challenge to NCLT's rights issue order

Investors file caveat against Byju's in Supreme Court

Four investors of embattled edtech firm Byju's have filed pleas in the Supreme Court requesting they be heard before the court decides on a plea likely to be filed against a National Company Law Tribunal (NCLT) order.

MIH Edtech Investments BV, Peak XV Partners Investments, Sofina SA and General Atlantic Singapore TL Pte Ltd filed separate caveats in the apex court on March 4.

On February 28, NCLT while permitting Byju's to go ahead with its $200-million rights issue, asked the firm to keep the proceeds in an escrow account. It also asked Byju's to consider extending the last date so that the rights of the investors were not affected.

While NCLT's orders are usually challenged in the National Company Law Appellate Tribunal (NCLAT), these investors have taken the unprecedented step of moving the Supreme Court. The court is selective when it comes to hearing pleas against NCLT.

At the NCLT, the investors argued that the company's move to call for rights issue was illegal and contrary to law and should be stayed. While the board of directors, which includes founder Byju Raveendran, his wife and cofounder, Divya Gokulnath, and his brother Riju Raveendran, argued that the investors were creating obstructions for the company.

On February 23, Byju’s investors in an extraordinary general meeting (EGM) voted for the removal of founder Raveendran as the CEO and a change of the board. The decision will remain on hold until the Karnataka High Court hears the case on March 13.

While the NCLT is yet to decide on whether the rights issue could be stayed, it passed this order after hearing the parties at length on February 27.

Raveendran has said that he has been unable to pay salaries to employees as the funds raised through a rights issue are locked in a "separate account" due to the ongoing dispute with the investors.

"Unfortunately, a select few (4 out of our 150+ investors) have stooped to a heartless level, ensuring that we are unable to utilize the funds raised to pay your hard-earned salaries. At their behest, the amount raised through the rights issue is currently locked in a separate account," Raveendran said in a letter to Byju's employees.