Byju Faces Investor Allegations: NCLT Hearing Deferred Amidst Controversy

Byju's, the troubled edtech, has been alleged from four investors of misusing funds from a recent rights issue, contrary to a National Company Law Tribunal order, a claim the company refutes. The Bengaluru tribunal deferred the hearing on April 23 to June 6, regarding an "oppression and mismanagement plea" filed by Peak XV Partners, General Atlantic, Chan-Zuckerberg Initiative, and Prosus. Investors assert Byju's failed to deposit rights issue funds into escrow before February 27, as required.

During the ongoing National Company Law Tribunal (NCLT) hearing, Byju’s emphasised the company’s full compliance with the court’s directives. Byju’s Spokesperson told TICE News that its senior counsel, K G Raghavan, firmly refuted allegations made by four foreign investors regarding violation of a court order issued on February 27th.

"In today's NCLT hearing, BYJU'S senior counsel, K G Raghavan, emphatically assured the honorable judges that the company has fully complied with the court's order dated February 27th. The allegations made by the counsels of four foreign investors regarding violation of the court order were firmly refuted by Mr. Raghavan. In fact, the founder had to take personal debt to honour employee's salaries which clearly show that there has been no violation."

The bench noted the petitioners' failure to substantiate their claims of non-compliance effectively. Their inability to convince the court of any wrongdoing on BYJU'S part was evident. The judges prudently questioned the rationale behind initiating contempt proceedings when no such petition had been formally listed for hearing, the spokesperson said.

The matter has been listed for the next hearing on June 6th, providing ample opportunity for BYJU'S to further reinforce its diligent adherence to the NCLT’s directives.

Allegations and Defense

Byju’s has been accused by four of its investors, including Peak XV Partners, General Atlantic, Chan-Zuckerberg Initiative, and Prosus, of misusing funds raised during a recent rights issue in violation of an NCLT order. The company strongly denies these allegations.

The investors alleged that Byju's failed to deposit the funds received from the rights issue before February 27 into the escrow account as mandated by the court. Additionally, they claimed that Byju's allotted shares to participants in the rights issue, contrary to the tribunal’s order to maintain status quo on shareholding.

However, Byju's refutes these claims, asserting that all actions were conducted in accordance with the law.

Delay in Salary Payments Amidst Financial Challenges

Byju Raveendran, founder and CEO of Byju’s, reportedly secured a private debt of approximately Rs 30 crore to cover March salaries for employees amidst financial difficulties faced by the company. Byju has been saying that the delay in salary payments is linked to funds raised through the rights issue, which are currently locked due to the ongoing investor dispute.

The company had previously disbursed partial salaries for February and delayed payments for March. However, both February and March salaries have now been partially settled, with Raveendran taking on personal debt to meet financial obligations.

Byju’s Struggles and Layoffs

Byju’s is grappling with a series of challenges, including financial constraints and layoffs. The company has initiated layoffs without putting employees on a performance improvement plan (PIP) or serving notice periods. Over the past year, Byju's has laid off over 10,000 employees as it contends with dwindling venture capital funding and declining demand for online learning services.

Despite efforts to address these issues, including capital infusion and leadership changes, Byju’s continues to face significant hurdles. Talks of divesting assets such as Great Learning and Epic are also underway as the company seeks to navigate its current challenges.

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