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NCLT asks Byju's to consider extending rights issue closure date

In an interim order dated February 27, the National Company Law Tribunal (NCLT), Bengaluru Bench said the funds received by the company in respect to the rights issue should be kept in a separate escrow account and it should not be withdrawn till the disposal of the matter.
Last Updated 28 February 2024, 16:52 IST

New Delhi: A company law court has asked embattled EdTech firm Byju's to consider extending the closing date of the rights issue, a request that the management hinted it would not accept even as estranged investors flagged technicalities that prevented closure of the issue on Wednesday.

In an interim order dated February 27, the National Company Law Tribunal (NCLT), Bengaluru Bench said the funds received by the company in respect to the rights issue should be kept in a separate escrow account and it should not be withdrawn till the disposal of the matter.

"The respondent company is to consider the extension of the closure date of the rights issue so that the rights of the petitioners with regard to the making of application for shares under their rights entitlement does not get prejudiced," it said.

The next hearing has been listed for April 4.

Sources close to the company said that the Wednesday timeline for closure of the rights issue will not be extended. As there is no stay on the rights issue, it will close as planned on Wednesday, they said.

A group of investors -- who cumulatively hold a third of Byju's and are baying for blood of founder and CEO and his family over mismanagement -- however, felt that the rights issue cannot go through in the absence of shareholders' authorisation for increase in share capital.

It is unclear if these investors participated in the rights issue, which the management has indicated will close as scheduled on Wednesday.

Investors in Byju's had alleged on Tuesday that the EdTech giant siphoned off $533 million in an obscure hedge fund in the US and sought a stay on a $200 million rights issue, calling it illegal and contrary to law.

The rights issue through which promoters of Byju's are seeking to infuse funds into the startup, is to close on Wednesday and during the course of the hearing earlier the two sides cited technicalities on whether the rights issue could go ahead.

On Friday, Byju's shareholders (prominent investors) had voted unanimously for removing Founder-CEO Raveendran and his family from the board over alleged "mismanagement and failures" at what was once India's hottest tech startup, but the company hit back calling the voting done in the absence of founders as invalid and ineffective.

Sources close to the investors had said more than 60 per cent of the shareholders voted in favour of all the seven resolutions at the EGM, which included removing the current management, reconfiguration of the board and a third party forensic investigation into acquisitions done by the company.

Contesting investors' claims, sources close to Byju's had put the number at 47 per cent on Friday.

Prosus -- one of the six investors who had called the EGM -- in a statement last week had said shareholders unanimously passed all resolutions put forward for vote.

These included a request for the resolution of the outstanding governance, financial mismanagement and compliance issues at Byju's; the reconstitution of the board of directors, so that it is no longer controlled by the founder of T&L; and a change of leadership of the company.

The once-storied EdTech startup, Byju's rose to dizzying heights before its perilous fall.

While return of students to physical classes post-pandemic and the recent acquisition of Aakash put Byju's under financial strain, the EdTech firm in last one year suffered others setbacks, including its auditor resigning, lenders beginning bankruptcy proceedings against a holding company, and a US lawsuit disputing the terms and repayment of a loan.

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(Published 28 February 2024, 16:52 IST)

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