NCLAT Dismisses Appeal Petition Of Investors Against BYJU’S, Ball Now In NCLT’s Court

The Chennai bench of the National Company Law Appellate Tribunal (NCLAT) has dismissed an appeal petition filed by four foreign investors of troubled edtech startup BYJU’S. 

The appeal was filed against the National Company Law Tribunal’s (NCLT) April 23 order, in which the Tribunal declined to issue an injunction against BYJU’S for allegedly violating its earlier directives. 

As per Moneycontrol, the NCLAT noted that it was inclined to dismiss the plea as the investors had already filed a contempt petition against the edtech major for violations. While refusing to intervene, the appellate tribunal added that the NCLT itself will pass an order on the matter.

“We cannot issue an order on a matter that is yet to be decided by NCLT… We cannot substitute the actions of NCLT,” remarked the NCLAT. 

Meanwhile, sources at BYJU’S said that the NCLAT told the investors, “You cannot misuse the appellate jurisdiction… You cannot approach us for any order issued by the NCLT. We only get involved if and when a substantial right has been violated”.

Arguing before the NCLAT, BYJU’S counsel contended that investors had not formally filed an application regarding the alleged breach of the interim order by BYJU’S. 

“They haven’t even filed a petition for contempt in the NCLT and yet, they have come here to argue as if the NCLAT must suo moto take it up for hearing,” the edtech’s counsel argued.

The story traces its origins to February 2024, when reports surfaced that the edtech major was looking to undertake a rights issue at a 99% valuation cut. Fearing the erosion of wealth, the investors organised an extraordinary general meeting (EGM) to oust promoters Byju Ravendran, who is also the CEO, and his family from the helm of affairs at the edtech giant. 

After the EGM and rights issue went ahead amid legal back and forth, the investors banded together and filed a plea before the NCLT alleging oppression and mismanagement within the company.

In its petition, the four investors (Peak XV Partners, General Atlantic, Chan-Zuckerberg Initiative and Prosus) claimed that the edtech startup was using some of the funds raised via the $200 Mn rights issue, in contravention of the Tribunal’s order to maintain status quo with regards to the shareholding. 

The investor plea also claimed that BYJU’S had not deposited the money it received from rights issue prior to February 27 in the escrow account. 

However, the company denied any wrongdoing. 

The latest development comes at a time when BYJU’S has been fighting on multiple fronts amid an increasing number of legal cases and insolvency proceedings, mass layoffs, a looming debt crisis, and valuation markdowns. 

Just a day ago, a clutch of the edtech’s Term Loan B (TLB) creditors initiated insolvency proceedings against three of the edtech giant’s guarantors for the loan in the Delaware district bankruptcy court.