In an interim relief for Byju’s, the Karnataka High Court on Wednesday ruled that any resolution proposed to be passed at the company’s extraordinary general meeting (EGM) on Friday will not be valid till the edtech firm’s petition is fully heard and disposed of by the court.
In another development, US-based Glas Trust Company filed an insolvency plea against the company, making it the fourth such plea against the edtech firm in the last six months.
The petition by Glas Trust, which is a non-bank loan agency, is being admitted by the Bengaluru bench of the National Company Law Tribunal (NCLT).
Byju’s has moved the Karnataka HC under Section 9 of the Arbitration and Conciliation Act, 1996, arguing that certain investors had violated the articles of association (AoA), the shareholders’ agreement (SHA) and the Companies Act, 2013, by calling for an EGM on February 23, 2024.
The group of investors include General Atlantic, Chan Zuckerberg Initiative, MIH EdTech Investments, Own Ventures, Peak XV Partners, SCI Investments, SCHF PV Mauritius, Sands Capital Global Innovation Fund, Sofina and T Rowe Price Associates.
Byju’s said that it is seeking to prevent these investors from disrupting the company’s operations by depriving it of urgently needed capital.
In its petition, Byju’s has highlighted that the purported reasons, including the removal of Byju Raveendran as CEO and chairman, for the EGM is merely a smokescreen designed to disrupt the management, control and functioning of the company. Investors are also seeking the removal of Divya Gokulnath and Riju Raveendran as directors.
It has argued that the proposed EGM was vexacious and devoid of merit, put forward to disrupt the ongoing rights issue, which offers all shareholders an equal opportunity to maintain their shareholding in the company via participation. Byju’s emphasised its commitment to providing fair and equal opportunities for all shareholders to participate in the rights issue.
“The court’s decision to grant an immediate relief by invalidating the resolutions passed by the EGM, underscores its recognition of the need to protect Byju’s best interests, and uphold the principles of corporate governance. The ruling ensures that the company can continue its operations with stability and focus, safeguarding the interests of all stakeholders,” the company said in a statement.
Byju’s said that it remains confident in its ability to navigate the current challenges and thanks all its shareholders for their overwhelming participation in the ongoing rights issue.
As reported earlier, to oust the board, majority – 50% plus one share – of votes cast should be in favour of the resolution. Raveendran and his family are the largest shareholder with a 26% stake.
The group of investors, who have given notice for the EGM, together own over 25%, but won’t participate in the meeting as they do not have voting rights under a shareholder agreement signed by them. Other shareholders own over 45% in Byju’s.