Karnataka HC Restricts BYJU’S From Making Allotment Of Shares, Asks To Maintain Status Quo

By Inc42 Media

SUMMARY

The court ordered that the status quo be maintained until the NCLT makes a final decision on the rights issue dispute

The court also directed the NCLT to decide on the rights issue aspect expeditiously, by July 31

The rights issue had been objected to by four investors who accused BYJU’S and its parent company, Think & Learn Private Limited, of oppression and mismanagement

The Karnataka High Court has restricted embattled edtech startup BYJU’S from making allotment of shares pursuant to its rights issue and await the final decision from the National Company Law Tribunal (NCLT).

The court also ordered that the status quo be maintained until the NCLT makes a final decision on the rights issue dispute. Any share allotments made after the single judge’s order on July 2 will be subject to the NCLT’s final decision. 

“During the proceedings of remand and till the decision which may be taken by the NCLT, the parties shall maintain status quo with regard to the subject matter dispute as obtained on today,” the order said. 

It added that the respondents shall not make allotment of shares in the interregnum, to be subject to the final order which may be passed by the NCLT. 

The court also directed the NCLT to decide on the rights issue aspect expeditiously, by July 31.

The rights issue had been objected to by four investors who accused BYJU’S and its parent company, Think & Learn Private Limited, of oppression and mismanagement. Addressing their plea, the NCLT issued an interim order on June 12 to halt the rights issue, as the investors alleged that BYJU’S had violated a prior undertaking not to proceed with any rights issue unless it increased its authorised capital.

On July 2, a Karnataka High Court judge set aside the interim NCLT order, finding merit in BYJU’S and Think & Learn’s argument that the tribunal’s decision was unreasoned. The judge refused to stay the order and sent the case back to the NCLT for a fresh decision within two weeks. 

The investors challenged this refusal through two appeals heard by the court this morning.

The order added, “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.”

BYJU’S, once the poster child of the edtech ecosystem, is currently in the news for all the wrong reasons. From multiple insolvency cases, allegations of hiding funds, and rising losses to a severe cash crunch, fight with investors, and layoffs – the startup is dousing fires on multiple fronts.

Source: Inc42 Media