Karnataka HC Restricts BYJU’S From Making Allotment Of Shares, Asks To Maintain Status Quo
In a significant development, the Karnataka High Court has issued orders to the education technology giant BYJU’S, preventing the company from proceeding with any share allotment following its proposed rights issue. This order comes as a result of a legal standoff initiated by four investors who have raised serious allegations against BYJU’S and its parent company, Think & Learn Private Limited.
The investors have accused the company of engaging in practices of oppression and mismanagement, casting a shadow over the corporate governance within one of India’s largest edtech entities. The Karnataka High Court, responding to these allegations, has directed that a status quo be maintained concerning the rights issue dispute until a final resolution is arrived at by the National Company Law Tribunal (NCLT).
“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 court’s order stated, emphasizing the importance of maintaining the current state of affairs until the dispute is conclusively resolved.
The significance of this order cannot be understated as it puts a temporary halt to BYJU’S plans for share allocations as part of its rights issue, an essential component in the company’s strategy for raising funds. The court has categorically stated that any share allotments made post the issuance of the single judge’s order on July 2nd would be contingent on the final judgment to be pronounced by the NCLT.
In its deliberation, the Karnataka High Court has also taken steps to expedite the resolution process by directing the NCLT to arrive at a decision concerning the rights issue by July 31. This move seeks to ensure that the matter is dealt with in a timely manner, avoiding prolonged uncertainty that could potentially harm the interests of the stakeholders involved.
The legal tug-of-war began when the four investors challenged the rights issue, alleging that BYJU’S had breached a previous commitment. According to the investors, the company had agreed not to go forward with the rights issue until it had increased its authorized capital. In response to these allegations, the NCLT, on June 12th, passed an interim order putting a halt to the rights issue. However, this order was later set aside by a single judge of the Karnataka High Court on July 2nd, sending the case back to the NCLT for a reevaluation.
Undeterred, the investors mounted a challenge against the Karnataka High Court judge’s refusal to stay the order, leading to this morning’s proceedings. Despite the ongoing legal battle, the High Court’s latest order has not delved into the merits of the arguments presented by either side. Instead, it has focused on maintaining the status quo, ensuring that no irreversible steps are taken until a definitive legal verdict is reached.
“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,” the order concluded, leaving the door open for a fair and objective hearing of the case by the NCLT.
As the legal proceedings continue, the future of BYJU’S rights issue hangs in balance, with significant implications for the company’s financing strategies and its relationship with its investors. The case is being closely watched by the business and legal communities alike, as it unfolds a crucial chapter in the governance and management practices within one of India’s tech behemoths.
