The Chennai bench of the National Company Law Appellate Tribunal (NCLAT) has dismissed an appeal petition filed by four foreign investors against edtech giant BYJU’S, shifting the focus to the National Company Law Tribunal (NCLT) to adjudicate the matter.
Dismissal of Appeal by NCLAT
The appeal petition was lodged against the NCLT’s April 23 order, which declined to issue an injunction against BYJU’S for allegedly breaching its earlier directives. The NCLAT, inclined to dismiss the plea, highlighted that the investors had already filed a contempt petition against BYJU’S for similar violations. The appellate tribunal emphasized that the NCLT itself will address the issue and refused to intervene further.
NCLAT’s Stance and BYJU’S Response
Addressing the investors, the NCLAT underscored the importance of not misusing the appellate jurisdiction and clarified that their role is activated only when a substantial right has been infringed. BYJU’S counsel argued that the investors had not formally submitted an application regarding the alleged breach, questioning their approach before the NCLAT.
Background and Legal Battles
The genesis of the dispute dates back to February 2024 when reports emerged of BYJU’S contemplating a rights issue at a significantly reduced valuation, sparking concerns among investors. Subsequently, investors initiated an extraordinary general meeting (EGM) to remove promoters Byju Ravendran and his family from leadership positions. Amid legal wrangling, investors lodged a plea with the NCLT, alleging oppression and mismanagement within the company.
Allegations and Denials
The investors accused BYJU’S of utilizing funds from the rights issue in violation of the NCLT’s order to maintain shareholding status quo. Additionally, they claimed that the company had failed to deposit the rights issue proceeds into an escrow account. BYJU’S refuted these allegations, denying any wrongdoing.
BYJU’S Multifaceted Challenges
The recent development unfolds amidst BYJU’S grappling with various legal battles, insolvency proceedings, workforce reductions, debt concerns, and valuation adjustments. Just days earlier, some of the edtech’s creditors initiated insolvency proceedings against guarantors for the loan, adding to its litany of challenges.
As the legal saga continues, all eyes are now on the NCLT’s impending decision, which will have far-reaching implications for BYJU’S and its stakeholders.
