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Byju Raveendran
A lawsuit filed against edtech giant Byju's by a group of lenders, who had requested an investigation into a $500 million fund transfer made by one of the company's subsidiaries, has been rejected by a US court.
The lenders, who were part of a syndicated term loan B taken by Byju's, accused the company of concealing the money.
According to a Bloomberg report, The lenders argued that due to Byju's failure to repay the loan, they had the right to appoint their representative, Timothy R Pohl, as the head of Byju's Alpha, the US subsidiary responsible for the fund transfer.
The lenders sought access and exclusive control over all of Byju's Alpha accounts, including the account from which the $500 million transfer took place. However, the defendant's counsel stated during the hearing that access to and control of three bank accounts, as well as their records, had already been provided.
The lenders contended that the $500 million transfer was relevant to determining whether an "event of default" had occurred.
In a ruling dated June 26, the Delaware Chancery Court determined that the transfer was merely a reaction to a potential event of default and not a factor in whether an actual event of default had occurred. The court stated that the plaintiffs had no basis further to investigate the transfer in the ongoing legal action.
Additionally, the court declared that any further examination of the $500 million transfer, which preceded the order granting control of Byju's accounts to the lenders' representative, fell outside the scope of Section 225 of the Delaware General Corporation Law. This section establishes guidelines for the appointment of a director to a company.
According to a Bloomberg report in May, Judge Morgan Zurn of the Delaware Chancery Court, who presided over the case, did not make a ruling regarding the appropriateness of the fund transfer. However, she sided with the lenders by instructing the managers of Byju's Alpha not to make significant changes within the company. The judge has scheduled a trial later this year to determine who will control Byju's Alpha.
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