The National Company Law Tribunal (NCLT) has issued a directive to BYJU’S, the prominent edtech giant, to uphold the current state of affairs concerning existing shareholders and their shareholding amidst a legal tussle over its rights issue.
Legal Battle Unfolds
The Bengaluru bench of the NCLT intervened following a petition filed by General Atlantic Singapore and Sofina S.A., alleging BYJU’S infringement of the Tribunal’s prior order regarding its $200 million rights issue. In a ruling dated February 27, the NCLT instructed BYJU’S to refrain from allotting shares without expanding the startup’s authorized share capital and mandated the segregation of funds acquired through the rights issue in a dedicated escrow account until the case’s resolution.
Allegations and Tribunal’s Response
The petitioners contested BYJU’S initiation of a second rights issue, arguing a violation of the previous NCLT order. Consequently, the Tribunal barred BYJU’S from proceeding with the subsequent rights issue until the resolution of the dispute regarding the initial rights issue.
The Tribunal further directed BYJU’S to safeguard the funds amassed from the ongoing rights issue in a separate account pending the case’s conclusion. Additionally, it ordered the preservation of the current shareholding structure until the primary petition’s adjudication, setting the next hearing for July 4.
BYJU’S Response and Clarification
In response to the allegations, sources within BYJU’S clarified that there was no separate rights issue as claimed by the petitioners. Instead, they explained that the recent rights issue was an extension of the preceding $200 million rights issue. Although commitments exceeding $200 million were secured, BYJU’S could only partially close the rights issue due to certain commitments failing to materialize into fund inflows, prompting the launch of a new offer.
Ongoing Legal Battles
BYJU’S finds itself entangled in various legal battles across Indian and US courts, with disgruntled investors citing violations of the NCLT’s earlier order among their grievances.
In its recent ruling, the NCLT mandated BYJU’S to furnish comprehensive details of allotments made before the authorized share capital expansion on March 2 within ten days. Additionally, BYJU’S is required to disclose full particulars of the escrow accounts utilized for parking funds garnered through the rights issue.
Challenges on Multiple Fronts
During the hearing, the investors’ counsel highlighted the company’s entanglement in multiple legal proceedings. Notably, investigations by the Enforcement Directorate (ED) and the Ministry of Corporate Affairs (MCA) are underway. Additionally, concerns have been raised regarding alleged diversion of funds amounting to $533 million from $1.2 billion Term Loan B lenders.
Apart from ongoing legal battles, BYJU’S faces insolvency proceedings from OPPO Mobiles, the Board of Control for Cricket in India (BCCI), Teleperformance Business Services, and Surfer Technology, exacerbating its legal challenges.
