Credit: Reuters photo
Aakash Educational Services Limited (AESL) has put on hold Byju's parent Think & Learn Pvt Ltd's (TLPL) share allotment, citing concerns that the Rs 25 crore it remitted does not comply with FEMA, the Companies Act, 2013, or the ECB (External Commercial Borrowing) guidelines.
The board recently concluded a Rs 100-crore rights issue and approved the allotment of shares to the Manipal Group and Beeaar Investco Pte Ltd, which contributed Rs 58 crore and Rs 16 crore, proportionate to their shareholding of 58.8% and 16%, respectively.
TLPL is currently undergoing a corporate insolvency resolution process (CIRP). Resolution Professional (RP) of TLPL had opposed the rights issue before the NCLT, NCLAT, and the Supreme Court. But TLPL tried to subscribe by depositing Rs 25 crore.
AESL in a statement said that on its insistence for clarity about compliance of funds, the RP provided the Debenture Subscription Agreement executed between TLPL and Byju’s Alpha Inc (a Delaware-incorporated investor), along with a legal opinion stating that the subscription money did not violate FEMA laws.
AESL then obtained independent opinions of a former Supreme Court justice and a retired RBI general manager, who indicated that the debenture issuance and the inflow of funds did not comply with FEMA, ECB Guidelines, or the Companies Act.
“It is clear that the money received by TLPL is in the nature of a loan/debenture in the framework of external commercial borrowing and cannot be used for the purpose of acquisition of equity i.e., shares in Aakash. If any inquiry was undertaken by a regulatory authority, Aakash could be accused of having allowed a rights issue, thereby enabling an ECB to be used for the purposes of investment into equity,” Sanjay Garg, Head – Legal of AESL, said.
After considering all legal opinions, the board deferred allotment of shares to TLPL until the pending issues are adjudicated by the NCLT, Bengaluru. The Rs 25 crore deposited by TLPL is likely to be kept in a separate interest-bearing account, pending final decision, the statement added.
AESL also indicated that the company may initiate another Rs 140-crore Rights Issue shortly.