Byju's seeks arbitration on NCLT trial; hearing adjourned to April 23

The plea for arbitration is interesting, as this will mean that the case will be moved away from NCLT's jurisdiction

Embattled edtech firm Byju’s has filed a plea with the National Company Law Tribunal (NCLT) seeking arbitration in its dispute with some of its key investors.

Byju’s counsel argued that according to the shareholding agreement, “such matters should be referred for arbitration before proceeding to NCLT.”

The investors' counsels pointed to various case laws and sections of the law, which said that such a matter cannot be referred to arbitration due to the violations alleged and the prayer sought, sources said.

The NCLT will now hear the case on April 23.

The plea for arbitration is crucial, as it will mean that the case will shift from NCLT’s jurisdiction.

On February 27, Byju’s and its investors locked horns over the company’s $200 million rights issue in a petition alleging oppression and mismanagement.

The NCLT, in its order on February 27, instructed the edtech firm to place funds obtained from the rights issue in an escrow account.

During Thursday's hearing, the petitioners' counsels — Peak XV Partners, Prosus, and General Atlantic — said the egregious breach of the undertakings given to the courts by Byju’s, including the no allotment of securities without increasing the authorised share capital.

They claimed that the company (Think and Learn Private Limited) violated the tribunal’s order by allocating shares to those who subscribed to the rights issue before increasing the authorised capital.

The NCLT during the proceedings said that such action would be a blatant violation of its interim order.

The NCLT took strong objection to any such violation and allotment and stated that its orders have to be followed scrupulously and any violations shall be taken very seriously.

Byju’s counsels submitted that they will provide responses and that they have not undertaken any violations.

The petitioners' counsels also highlighted how Byju Ravindran had breached all relevant rules and regulations by announcing unfair and incorrect results of the Emergency General Meeting (EGM) voting in complete violation of the applicable rules.

With the NCLT now set to hear the matter on April 23, it means that Byju’s cannot use the funds raised via the rights issue.

The petition against Byju's at NCLT has been signed by four investors - Prosus, General Atlantic, Sofina, and Peak XV (formerly Sequoia) along with support from other shareholders including Tiger Global and Owl Ventures, according to sources.

Byju’s is grappling with multiple challenges, including a cash crunch, delays in financial reporting, and legal disputes with lenders. The company has raised a total of $5.08 billion from investors.

Four investors of Byju’s have also filed caveats in the Supreme Court, asking to be heard before any decision on a plea that is likely to be filed against an NCLT order.