Karnataka HC directs BYJU’S to maintain status quo, restricts share allotment
The court order came in response to appeals by a group of investors, following a July 2 decision by a single judge of the Karnataka High Court to set aside an NCLT stay on BYJU’S' second rights issue.
The Karnataka High Court, in an order dated July 5, has directed BYJU’S to maintain the status quo regarding a second rights issue proposed by the edtech company until a decision is made by the National Company Law Tribunal (NCLT).
The order by a division bench of the High Court also restricts from making allotments of shares and requires them to await the final decision from the NCLT.
The July 5 court order came in response to appeals by a group of investors following a decision by a single judge of the Karnataka High Court on July 2 to set aside an NCLT stay on BYJU’S' second rights issue.
The NCLT’s Bangalore bench order had directed BYJU’S to maintain the “status quo” for existing shareholders and their shareholding, and restrained it from going ahead with a second rights issue.
Think and Learn Pvt Ltd, the parent company of BYJU’S, along with Byju Raveendran, filed writ petitions against the June 12 order of the NCLT. Normally, NCLT orders are appealed to the National Company Law Appellate Tribunal, but in this case, it was challenged in the Karnataka High Court.
The Karnataka High Court’s order on July 5 also stated that any share allotments and related transactions made after the July 2 order will be subject to the final decision of the NCLT.
“The NCLT shall consider the case on remand independently and on its own merits and without influenced by any of the observations in its earlier order, without influenced by the observations in the order of learned Single Judge and any other order which may have been passed previously to decide the issues involved, strictly on merits and in accordance with law,” the Karnataka High Court order noted.
The NCLT has been instructed to promptly decide on the application filed by investors concerning the second rights issue by July 31.
“It is clarified that this Court has not gone into the merits of the case of the appellant and has not expressed any opinion on merits. Any observations in this order shall not be construed as an expression on merits,” the Karnataka High Court order said.
BYJU’S and prominent investors, including Prosus, General Atlantic, Peak XV Partners, and Sofina Ventures are in conflict. The investors appealed to the NCLT to void the $200 million rights issue initiated in January.
The Tribunal ordered BYJU’S to place the rights issue funds in a separate escrow account, with no withdrawals allowed until the oppression and mismanagement suit filed by four investors is resolved.
Meanwhile, BYJU’S had proposed a second right issue through an offer letter dated May 11. This issue was scheduled between May 13 and June 13.
The Byju Raveendran-led company, facing severe liquidity issues, is seeking new funding at a 99% discounted valuation through the rights issues.
Edited by Jyoti Narayan
