The future of Byju’s, India’s leading edtech company, hangs in the balance as the Karnataka High Court prepares to hear arguments on March 13 regarding a potentially disruptive investor revolt. The court will determine the validity of any resolutions passed during an extraordinary general meeting (EGM) held by Think and Learn Pvt Ltd, the parent company of Byju’s, on February 23.
“In its petition, Byju’s highlighted that the purported reasons for the EGM, including the removal of Byju Raveendran as CEO and Chairman, as well as Divya Gokulnath and Riju Raveendran as Directors, were merely a smokescreen designed to disrupt the management, control, and functioning of the company,” the firm said in a statement, as quoted by a TOI report. Byju’s argued that the proposed EGM was “vexatious and devoid of merit”, and has been put forward to disrupt the ongoing rights issue of the company. “The ruling ensures that the company can continue its operations with stability and focus, safeguarding the interests of all stakeholders,” Byju’s said, as quoted by TOI.
The controversy stemmed from an extraordinary general meeting (EGM) held on February 23 by Think and Learn Pvt Ltd, the parent company of Byju’s. Major investors, reportedly holding over 32 per cent stake in the company, voted on resolutions seeking the removal of founder and CEO Byju Raveendran and his family members from the board. This move was allegedly prompted by concerns over “mismanagement and failures.”
However, Byju’s challenged the validity of the EGM and the resolutions passed. The Karnataka High Court issued an interim order, effectively putting the investor actions on hold until the final hearing scheduled for March 13. This hearing will determine whether the resolutions passed at the EGM will be implemented.
The once high-flying edtech unicorn Byju’s is currently embroiled in a series of legal tussles with investors, lenders, and vendors. The troubles facing the company seem to be escalating rapidly. The investors had attempted to oust Byju’s co-founder and CEO Byju Raveendran and overhaul the board of directors through an extraordinary general meeting (EGM). While the resolutions passed at the EGM, Byju has dismissed it as invalid, citing a pending case in the Karnataka High Court challenging the validity of the EGM itself, as report by Mint earlier in February.
The most significant legal challenge comes from a consortium of prominent investors, including Prosus NV, General Atlantic, Sofina, and Peak XV Partners, who have filed a case before the National Company Law Tribunal (NCLT) against Byju’s $200 million rights issue. These investors allege that the issue suppresses their rights and accuse the company of mismanagement.
Apart from the investor disputes, Byju‘s is also facing legal battles with its lenders and vendors. The company had raised $1.2 billion through a term loan B in 2021 but has struggled to repay it due to rising interest rates and failure to meet covenants. Lenders have taken Byju’s to court in the US and have also filed an insolvency petition against the company in the Bengaluru NCLT bench.
Vendors, including the French multinational Teleperformance SE’s Indian unit and the Board of Control for Cricket in India (BCCI), have filed separate insolvency petitions against Byju’s to recover unpaid dues.
Adding to the company’s woes, the Enforcement Directorate has issued a look-out notice against Raveendran in connection with an alleged violation of India’s foreign exchange rules involving ₹9,362.35 crore.
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Published: 13 Mar 2024, 08:08 AM IST