Karnataka HC extends interim protection to Byju Raveendran till March 28

The Karnataka High Court today extended the interim protection granted to edtech firm Byju’s till March 28, safeguarding founder Byju Raveendran against any potential ouster in an extraordinary general meeting (EGM) by investors.

On February 23, a group of investors of Byju’s such as Prosus, General Atlantic and Peak XV, during the extraordinary general meeting (EGM) voted and passed resolutions to remove founder Byju Raveendran as chief executive officer (CEO). Resolutions were also passed to change the board, which included Byju Raveendran’s wife and co-founder Divya Gokulnath, and his brother Riju Raveendran. However, the resolution couldn’t be executed due to the Karnataka High Court order.

“In today’s Karnataka High Court hearing, the court has granted time to Think and Learn (Byju’s parent) to file a rejoinder to the response filed by some of the investors,” said Byju’s spokesperson. “The stay against the purported resolutions at the ‘so-called’ EGM that the investors attempted to pass on 23 February 2024 continues and, as such, none of those resolutions can be given effect to. They are unactionable. The matter will next be heard on 28th March,” said the spokesperson.

The case was adjourned reportedly amid high drama and allegations by both the parties. The investors alleged that Byju’s had obtained the Karnataka High Court interim order by fraud. Byju’s counsel alleged serious discrepancies in the affidavits filed by the investors’ representatives, amounting potentially to “perjury”. 

A ‘serious objection’

“I have one serious objection to make. I think the respondents (investors) who have filed what they call preliminary statement of objections have played fraud on this court. I am saying so with full sense of responsibility,” argued Senior Counsel KG Raghavan, who appeared for Byju’s. 

Raghavan referred to a discrepancy in the date of the objection-statement filed by the investors (March 11) and the date on which an investor swore an affidavit (March 8), according to law platform Bar & Bench. “This is a serious issue. Just because they are foreign investors, it does not mean they can take Indian courts for granted like this. I’ll show how the whole thing is manipulated. I would request the Court to initiate suo motu action against the deponents,” argued Raghavan.

Senior advocate Satish Parasaran, who represented the investors, argued that the outrage is fine if it is ratified tomorrow. He argued that one can throw as many allegations as possible. The court has directed both sides to make submissions on that issue before the next hearing.

The court has directed Byju’s to put their allegations in writing. The case was thus adjourned after Byju’s sought time to file a response to the objections filed by investors.

During the extraordinary general meeting on February 23, shareholders unanimously passed all resolutions put forward for vote, according to Byju’s investor Prosus. These included a request for the resolution of the outstanding governance, financial mismanagement and compliance issues at Byju’s; the reconstitution of the Board of Directors, so that it is no longer controlled by the founders of Think & Learn, (Byju’s parent); and a change in leadership of the company.

According to investor sources, holders of over 60 per cent of the cap table voted in favour. Byju’s founders hold 23-25 per cent of the cap table.

Byju’s vs BCCI

Meanwhile, the National Company Law Tribunal’s (NCLT) Bengaluru bench on Wednesday listed the next hearing in the insolvency plea filed by the Board of Control for Cricket in India (BCCI) against Byju’s on March 20.

The court is expected to pronounce an order on the BCCI’s insolvency petition against the edtech company next week after arguments conclude.

The BCCI has alleged that Byju’s has defaulted on a payment of Rs 158 crore. For this, last year in December, it approached the NCLT.

According to the sources, Byju’s argued that BCCI has not rendered any service, and therefore, the present debt cannot be considered as an operational debt. What has been granted under the Agreement is the right to display the logo of Byju’s, but there is no form of service provided by BCCI.

Also, the edtech company argued that the agreement between BCCI and Byju’s ended on 31 March 2020 and therefore, the question is whether the contract or agreement has been extended. Clause 18 of the Agreement prescribes the mode and manner in which the extension of the Agreement can be affected. Byju’s argued that there is no agreement for the extended period signed to date between the parties. All the invoices for the earlier contract have been paid, and the present claim is for the period post-expiry of the Agreement. Therefore, all the questions about the extension, payment, and other related issues to be decided by way of a dispute resolution mechanism can not be adjudicated by this Tribunal.

Byju’s argued that IBC (Insolvency and Bankruptcy Code) cannot be used as a recovery mechanism, and the matter should be referred to arbitration for adjudication.