NCLT halts Byju’s second rights issue for raising funds

The Bengaluru bench of the National Company Law Tribunal on June 12 passed an interim order restraining ed-tech firm Byju’s from going ahead with its second rights issue..This interim order was passed by a special coram of judicial member SS Sundaram and technical member Manoj Kumar Dubey in a petition by four investors, MIH EdTech Investments, a subsidiary of Prosus NV, General Atlantic Singapore, Peak XV Partners Operations LLC and Sofina, who alleged oppression and mismanagement by Think & Learn Pvt Ltd which owns Byju’s..The order by the special coram restrained Byju’s from proceeding with its second rights issue till the main petition of the four investors is disposed of.It also directed the company to maintain status quo with regard to the existing shareholders till final disposal.“This Tribunal hereby restrains Byju’s from going ahead with the present rights issue which is in progress till the disposal of the main petition. They are further directed to keep the amounts collected so far since opening of the second rights issue in relation to this offer in a separate account which should not be utilised till the disposal of the petition. Further, status quo with regard to existing shareholders and their shareholding shall be maintained till the disposal of the main petition,” the order said..The four investors alleged in their application that Byju’s had violated the undertaking given to NCLT and recorded in the tribunal’s order of February 27.In the February 27 order, the NCLT had recorded Byju’s statement that there will be no allotment of shares without increasing the authorised share capital. Further, the money received in the rights offer will be kept in a separate account till the disposal of investors’ plea, it was submitted..The investors pointed out that Byju’s had not only allotted shares to certain shareholders on March 2 this year but also proposed a second rights issue for fresh allotment despite pendency of the petition.The company’s second rights issue opened on May 13 and was to conclude on June 13.Incidentally, Byju’s launched the second rights issue after it failed to raise the intended and required funds in the first rights issue held between January 29 to February 28..The investors argued that there is an LOC against Raveendran Byju in a case being investigated by Enforcement Directorate (ED).It also argued that there was no board resolution passed by the company for the second rights issue for raising funds.It was contended that the 8,14,530 additional shares allotted to Riju Ravindran on March 2, 2024 was not permissible and should be set aside..Byju’s argued that the shares were not allotted in respect of only Riju Ravindran but all the eligible applicants to the extent of the headroom available and subsequently, the authorised share capital was increased utilizing their votes to pass the resolution..The tribunal directed Byju’s to file complete details of the allotment made on March 3 before the increase of authorised share capital and separate equity shares allotted after increased of authorised share capital..The plea will now be considered on merits on July 4..Senior advocates Sudipto Sarkar and Satish Parasaran and advocates Shankh Sengupta, Sampath Kumar, Tine Abraham, Yogesh Singh, Akshaya R., Aubert Sebastian, Manasa S., Rangam Sharma, Lavanya B. Ananth, Sujoy Sur, Angelika Awasthi, Neha Dhavalikar, Aneeta Mathew, Prarthna Bathija and Subhang N appeared for investors.Senior advocates KG Raghavan and Dhyan Chinnappa along with advocates Manmeet Singh, Rishab Gupta, Ishu Gupta, Nidhi, Sairam Subramanian, Siddharth Doshi, Saloni Shah and Ashika Jain briefed by Saraf & Partners appeared for Byju’s and Byju Raveendran.[Read order]