Karnataka High Court directs Byju's to maintain status quo

Karnataka High Court, Byju

Karnataka High Court, Byju

A division bench of the Karnataka High Court on Friday directed Byju to remain so While the Bengaluru-based National Company Law Tribunal (NCLT) is reconsidering the question whether the ed-tech firm should be barred from going ahead with a second rights issue.

The rights issue had been objected to by four investors, who had accused Byju's and its parent company Think & Learn Pvt Ltd of oppression and mismanagement.

Considering the plea of ​​these investors, the NCLT had passed an interim order on June 12 to stay the rights issue. The interim order was passed after the investors alleged that Byju's had violated its earlier undertaking that it would not go ahead with any rights issue until it raised its authorised capital.

On July 2, a single bench of the Karnataka High Court had set aside the interim order of the NCLT, accepting the arguments of representatives of Byju's and Think & Learn that the tribunal's order was improper.

The single judge also refused to stay the operation of the order, and referred the matter back to the NCLT for a fresh decision in two weeks.

The refusal to stay the order was challenged by the investors through two appeals, which were heard by a division bench of the high court, including the Chief Justice, this morning. NV Anjaria and justice KV Arvind,

The bench today ordered that status quo be maintained until the NCLT takes a final decision on the rights issue dispute. The court said that any allotment of shares after the single judge order of July 2 will be subject to the final decision of the NCLT. The NCLT has also been asked to decide on the rights issue aspect expeditiously and by July 31.

“During the remand proceedings and till the decision of the NCLT, the parties shall maintain status quo in respect of the subject matter dispute as arrived at today… Allotment of shares and other related transactions that may have taken place between the date of the single judge order till 02.07.2024 shall be subject to the final order passed by the NCLT and rights in that regard shall be governed accordingly,” The order states.

The court clarified that it had not expressed any opinion on the merits of the case and said that the NCLT should consider the matter independently and without being influenced by any comments made by the High Court.

Senior advocate Uday Holla, appearing for the investors, argued that since the single judge has refused to pass a status quo order, shareholders' rights may be dilution if Byju's goes ahead with its controversial rights issue before the NCLT decides the matter.

Holla said Byju's had already allotted some shares between July 2 and July 3.

Senior advocate KG Raghavan, representing Byju's, argued that it was not difficult for the company to maintain the status quo as of today. He also reiterated that Byju's had not breached any undertaking contrary to the investor's claims.

Meanwhile, Holla raised concerns that some shares had already been allotted since the single judge order of July 2. Holla argued that Byju's cannot claim equity on anything done since July 2 and all such actions should be subject to the final decision of the NCLT.

Raghavan's response also included protest against the allegations made against Byju and the manner of reporting.

,Whatever has happened during the pendency of the company petition is always subject to the final order. Where is the question? It cannot be that all these comments are taken from your honourable judge and shown to the NCLT saying 'look what the honourable chief justice sitting in the division bench has said.' This has become problematic. And tomorrow, it is published as headlines in the newspaper. Whatever happens verbally, that also gets published. In this case, yesterday a comment was made by a member of the NCLT, it was published in headlines yesterday!”

After hearing both the parties (both of whom agreed to the interim status quo order), the Court disposed of the appeals by directing Byju’s to maintain status quo. remain so From today.

The directors of Think & Learn and Byju's were represented by senior advocates KG Raghavan and Dhyan Chinnappa.

The investors were represented by senior advocates Uday Holla and Gaurav Chopra.

General Atlantic Singapore v Byju Ravindran.pdf


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