The Karnataka High Court on Tuesday set aside a June 12 interim order passed by the National Company Law Tribunal (NCLT), Bangalore which had restrained ed-tech firm, Byju’s from going ahead with a second rights issue.
Justice SR Krishna Kumar pronounced the decision this afternoon, after having reserved orders in the matter last week.
The judge passed the order on merits and sent the matter back to the NCLT for reconsideration.
The Court concluded that the NCLT's order was non-speaking, cryptic, laconic, unreasoned, and passed without an application of mind by the tribunal. Therefore, it was liable to be set aside, the Court held.
"The NCLT clearly fell in error in allowing C.A.No.71/2024 without assigning any reasons whatsoever for passing the impugned order ... The matter is remitted back to the NCLT for reconsideration of C.A.No.71/2024 afresh and to pass a reasoned and speaking order in accordance with law bearing in mind the observations made in this order within a period of two weeks from 04.07.2024," the Court's order stated.
A lawyer representing certain investors requested the Court to stay the operation of today's order so that it may be challenged and no shareholder rights are diluted in the meantime.
The Court, however, refused to stay the order's operation.
Justice Kumar observed that he had given an opportunity earlier for all rival sides to arrive at an agreement so that an order may be passed on consent to send the matter back to the NCLT.
However, since no such consensus has been arrived at, the matter has now been decided on merits, he said.
"I gave you a chance, the investors were not ready. Unless they agree, I won't be in a position to grant any order (on consent) ... You are at the mercy of promoters ... The promoters did not want to concede anything, therefore I was forced to do this. I had no choice," Justice Kumar told advocate Shankh Sengupta.
The Court today allowed two petitions filed against the NCLT's decision to issue an interim stay on a second rights issue by Byju's.
The NCLT passed the June 12 interim order on a petition filed by four investors (MIH EdTech Investments, General Atlantic Singapore, Peak XV Partners Operations LLC and Sofina) which accused Think & Learn (parent company which owns Byju's) of oppression and mismanagement.
The interim order restrained Byju’s from proceeding with its second rights issue till the main petition of the four investors was disposed of.
The move was challenged in the two writ petitions filed by Think & Learn (parent company of Byju's) as well as its Managing Director Byju Raveendran and executive directors Riju Raveendran and Divya Gokulnath.
Appearing for the petitioners, Senior Advocates KG Raghavan and Dhyan Chinnappa argued that the NCLT's interim order of stay was liable to be set aside as it was bereft of reasons.
On the other hand, Senior Advocates Udaya Holla and Satish Parasaran, appearing for investors, maintained that Byju's and Think & Learn had violated an earlier undertaking to the NCLT to not proceed with the rights issue.
Holla countered the allegation that the NCLT's June 12 order was unreasoned and argued that the interim order has to be read along with the earlier orders of the tribunal and not in an isolated manner. If all of the NCLT's orders are read together, sufficient reasons would emerge, Holla said.
The senior counsel also touched upon various allegations of misconduct against Byju's and its management. These submissions were strongly objected to by the counsel for the petitioners.
Senior Advocates KG Raghavan and Dhyan Chinappa and advocate Dr Rishab Gupta, briefed by advocates Manmeet Singh and Sairam Subramanian from Saraf and Partners, represented the petitioners (directors of Byju's and Think & Learn).
The respondent-investors were represented by Senior Advocates Udaya Holla, Sudipto Sarkar and Satish Parasaran briefed by advocates Shankh Sengupta and Tine Abraham from Trilegal.
[Read Order]