An NCLT bench, comprising Justices K Biswal and Manoj Kumar Dubey, recently presided over a hearing concerning a plea challenging Byju’s rights issue.
Allegations Against Byju’s
Investors including General Atlantic, Prosus, and Peak XV have alleged that Byju’s violated the tribunal’s 27 February order. The order directed Byju’s not to allot shares to investors participating in the rights issue without increasing its authorized share capital.
The denied the allegations made by the investors. The NCLT has given 10 days to file its response. The case is scheduled for the next hearing on 23 April.
Investors’ Concerns
A group of investors, including Prosus NV, General Atlantic, Sofina, and Peak XV Partners, supported by Tiger Global and Owl Ventures, moved the NCLT against Byju’s $200-million rights issue fearing a significant loss in their investments.
NCLT’s Decision on EGM
The NCLT refused to stay the extraordinary general meeting (EGM) intended to augment the authorized share capital of Byju’s, enabling its $200-million rights issue.
Concerns About EGM Process
Investors argued that they were not allowed to inspect documents to determine their voting stance at the EGM. They also alleged that not all shareholders received the required notice as per legal obligations.
Conflict with Companies Act
It’s authorized share capital is ₹6.5 crore, while the rights issue’s face value is ₹40 crore, conflicting with provisions of the Companies Act. This necessitated an EGM to increase the authorized share capital of the company.
The bench emphasized that the NCLT orders must be meticulously followed by all parties involved.
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