Karnataka HC rejects NCLT stay on Byju’s second rights issue, sends case back to tribunal
The Karnataka High Court on July 2 rejected the National Company Law Tribunal (NCLT) order that restrained embattled Byju’s from launching a second rights issue.
On Tuesday, Justice Krishna Kumar of the Karnataka High Court said he was sending the case back to the NCLT for a fresh consideration. A detailed copy of the order is awaited.
On June 12, NCLT instructed Byju’s to maintain the status quo regarding existing shareholders and their shareholding. Byju’s had appealed against the order in the High Court.
Investors, such as Peak XV Partners, General Atlantic, Chan-Zuckerberg Initiative, and Prosus, submitted a request to the National Company Law Tribunal (NCLT) to stop Byjus’ second rights issue. They expressed concerns that the rights issue would lead to additional dilution of their ownership in the company.
These investors have raised concerns about alleged mismanagement within Byju’s and have filed a petition seeking to halt the rights issue. They argue that the proposed valuation for the rights issue is significantly lower than Byju’s peak valuation of $22 billion, falling below 99 percent of the enterprise value.
The second rights issue started on May 13 and was to end on June 13.
“This Tribunal hereby restrains the Respondents (Byju’s) from going ahead with the present rights issue which is in progress, till the disposal of the main plea. The Respondents are further directed to keep the amounts collected so far since the opening of the second rights issue in relation to this offer in a separate account which should not be utilised till the disposal of the main petition,” the NCLT order of June 12 read.
It is common for NCLT rulings to be appealed at the National Company Law Appellate Tribunal (NCLAT). However, in this case, Byju’s opted to file a writ petition in the high court instead of going through the NCLAT for further legal proceedings.
