Expecting Challenge To NCLT’S Order, BYJU’S Investors File Caveats In SC

In a fresh twist to the BYJU’S saga, investors of the troubled edtech startup have reportedly filed caveats in the Supreme Court (SC). 

The petitions urged the SC that the company’s investors be heard before any order is passed on any potential plea filed against a recent National Company Law Tribunal (NCLT) order. 

The tribunal on February 27 greenlit the company’s $200 Mn rights issue but directed it to keep the proceeds in a separate account and consider extending its last date to protect rights of investors. However, the NCLT is yet to take a call on whether the rights issue can be stayed.

As per Economic Times, backers Prosus (MIH Edtech Investments BV), Sofina, Peak XV Partners and General Atlantic (Singapore) filed separate caveats in the Court on Monday (February 4).

It is pertinent to note that NCLT’s orders are typically appealed before the National Company Law Appellate Tribunal (NCLAT) and the SC is very selective when it comes to hearing petitions challenging NCLT decisions.

However, the investors’ decision to move the apex court could likely be led by considerations around pre-empting BYJU’S, which has been mounting back-to-back legal challenges against its investors.

While the edtech major has been embroiled in a public standoff with its investors for quite some time now, matters came to blows last month in the middle of a $200 Mn rights issue undertaken by cash-strapped BYJU’S at a valuation cut of 99%.

Fearing erosion of their stake in the startup, the backers of the startup convened an extraordinary general meeting (EGM) and voted to oust the founder and CEO Byju Raveendran and reconstitute the company’s board (which comprises only him, his wife Divya Gokulnath and brother Riju Ravindran).

The investors were unhappy with the company’s functioning and even alleged financial mismanagement at the startup. 

Alongside, the backers also filed multiple petitions before the NCLT seeking a stay on the rights issues and maintaining a status quo on encumbering and transferring of any assets of Byju’s and its subsidiary. It also sought directions for complete disclosure of information by the company.

However, NCLT did not stop the edtech major from undertaking the rights issue but directed BYJU’S to keep the proceeds in a separate account and consider extending its last date to protect rights of investors. 

The move to file caveats beforehand in SC comes weeks after BYJU’S, in a preemptive move, approached the Karnataka HC last month against the EGM called by investors. The HC, in its February 21 order, said that any decisions taken by shareholders at the EGM would not come into effect till the next hearing on March 13.

The latest legal standoff comes as BYJU’S continues to deal with a cash crunch and has been unable to pay salaries of employees for the month of February. Not just this, the startup also faces multiple insolvency proceedings from its vendors, a looming debt crisis and a bevy of legal cases.