Byju's VS Investors: Karnataka HC extends stay on resolution passed at Byju's EGM till March 28

The Karnataka High Court has extended its interim protection for Byju Raveendran, CEO of the edtech giant Byju's, against the resolutions passed during the extraordinary general meeting (EGM) held on February 23. 

The court's decision postpones the effect of any resolutions made by shareholders of the company, including the potential ousting of Raveendran and his family members, until March 28. The move comes as a temporary relief for Raveendran amidst the ongoing legal battle with several of the company's investors.

Allegations of fraud and perjury

During the proceedings, allegations flew from both sides. Investors accused Byju's of obtaining the interim order through fraudulent means, while Raveendran countered with accusations of perjury against the investors, pointing out discrepancies in the filing dates of affidavits. The court has instructed Byju's to formally document these allegations for further consideration.

The EGM controversy

On February 23, 2024, a group of investors, including Prosus, General Atlantic, and Peak XV, organized an extraordinary general meeting (EGM) to vote on the removal of Byju Raveendran as CEO, along with two other board members, including his wife Divya Gokulnath and brother Riju Raveendran.

Over 60% of the investors present at the EGM voted for Raveendran's ouster. Byju's challenged the validity of this meeting, arguing that it was invalid since no founders were present, a requirement according to the shareholder agreement.

However, the Karnataka High Court had earlier stated that until it delivers a final verdict, any resolution made at the EGM will not be considered valid. This legal challenge led to the initial interim order being extended.

Following the EGM, Byju Raveendran, in an email to employees, stated that he continues to be the CEO of Byju's, that the management remains unchanged, and that it's “business as usual.”

NCLT's role and BCCI's insolvency plea

Parallel to the High Court's proceedings, the National Company Law Tribunal (NCLT) is also hearing related cases against Byju's. Notably, the NCLT is considering an insolvency plea by the Board of Control for Cricket in India (BCCI) over unpaid dues, with the next hearing scheduled for March 20.

Byju's defence argues that the claims do not constitute an operational debt, as they pertain to a period after the expiration of their contract with BCCI.

Investors challenge rights issue

The issue is not limited to EGM, A group of investors has also approached the NCLT challenging Byju's $200-million rights issue, leading to an order to keep the raised capital in an escrow account. The move adds another layer to the complex legal struggle facing the company.