Relief for Byju's as NCLT Refuses Deferral of EGM Over Rights Issue

In a breadth of relief to troubled edtech, National Company Law Tribunal (NCLT) refuses postponement of extraordinary general meeting (EGM) called by Byju’s amid legal tussle, listing case for further hearing.

The NCLT tday declined to defer an EGM summoned by the board of directors of Byju’s, the embattled edtech giant. Scheduled for March 29, the EGM is pivotal for Byju’s as it aims to raise its authorized capital to facilitate a rights issue, a strategy devised to navigate through its extensive liquidity crisis.

Legal Battle Unfolds

During the hearing at the NCLT today, investors voiced concerns regarding the true intention behind the EGM. They alleged that the meeting's purpose extended beyond merely increasing the company's authorized capital. Investors contended that the agenda also included amendments to the memorandum of association, which they deemed a blatant attempt to circumvent the NCLT's previous order issued on February 27. 

Earlier, the NCLT had directed Byju’s to segregate funds received from the rights issue into an escrow account until the resolution of an oppression and mismanagement plea lodged by four investors. Moreover, the tribunal instructed Byju’s to deliberate on extending the closure date of the rights issue to safeguard the petitioners' rights.

Dispute Over Notice

Furthermore, investors argued that Byju’s failed to facilitate document inspections, crucial for shareholders to make informed decisions at the EGM. They contended that not all shareholders had been duly served notice of the meeting in accordance with legal requirements.

 In response, Byju’s defended its actions, asserting that investors were indeed provided with opportunities for document scrutiny, and all shareholders received notice of the EGM.

What Did NCLT Say?

Consequently, the NCLT opted against issuing an interim order, citing the imminent hearing on April 4, where the broader aspects of the case would be deliberated. With the legal battle poised to escalate, the tribunal has listed the case for further hearing, ensuring that all pertinent issues are duly addressed.

Previous Proceedings

This latest development is part of an ongoing legal saga between Byju’s and aggrieved investors. In prior hearings, investors had vehemently opposed Byju’s move to proceed with the rights issue, labeling it as unlawful and in violation of established norms. Conversely, Byju’s board, including founder Byju Raveendran, his wife Divya Gokulnath, and brother Riju Raveendran, argued that investors were impeding the company’s progress.

Subsequent to NCLT’s order, investors took their grievances to the Supreme Court, filing pleas to ensure their voices are heard before any decisions are made regarding the NCLT's ruling. MIH Edtech Investments BV, Peak XV Partners Investments, Sofina SA, and General Atlantic Singapore TL Pte Ltd lodged separate caveats in the apex court on March 4, signaling a protracted legal battle ahead.

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