MCA refutes reports claiming BYJU’S cleared of financial fraud; says probe ongoing

The Ministry of Corporate Affairs (MCA) on Wednesday refuted news reports claiming that BYJU'S has been cleared of financial fraud in an ongoing investigation. This comes after Bloomberg reported that the MCA probe did not find evidence of financial fraud but uncovered governance shortcomings in the troubled edtech firm.

“It is categorically clarified that such reports are factually incorrect and misleading. The proceedings initiated by MCA under the Companies Act, 2013, are still on going and no final conclusion should be drawn in this matter at this stage,” the MCA said in a press release.

The Bloomberg report, citing sources, noted that the MCA’s probe found no evidence of fund syphoning or financial account manipulation but did uncover governance shortcomings that contributed to the startup’s mounting losses.

The investigators’ report has not yet been made public.

The investigators’ report does not specifically determine whether BYJU’S Founder and Group CEO Byju Raveendran is responsible for the governance lapses or if he is qualified to lead the company, the Bloomberg report added.

BYJU’S didn’t comment on the matter.

In February, a group of investors, including Prosus and Peak XV, sought to declare the current management, including Raveendran, unfit to run the company and proposed appointing a new CEO and board.

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Prosus writes off its investment in BYJU'S; recognises $493M loss

Prosus, BYJU’S’ largest institutional shareholder, which recently wrote off its entire investment in the edtech firm, had issued a statement expressing apprehensions regarding the startup's reporting and governance frameworks a month after its representative, Russell Dreisenstock, formally stepped down from the Board of the edtech firm last year.

Meanwhile, the Bengaluru-based company is fighting multiple legal battles with its investors and lenders.

BYJU’S is locked in a tussle with several prominent investors, including Prosus, General Atlantic, Chan Zuckerberg Initiative, and Peak XV, which have sought to void a $200-million rights issue initiated in January by appealing to the National Company Law Tribunal (NCLT).

Most recently, BYJU’S filed a petition with the Karnataka High Court, challenging the NCLT order that blocks the company from moving forward with its second rights issue.

The NCLT order dated June 12 also directed BYJU’S to maintain the “status quo” for existing shareholders and their shareholding.

(The story has been updated to reflect the Ministry of Corporate Affairs’ statement on the ongoing investigation into BYJU’S.)