NCLAT Dismisses Appeal Raised By Byju's Investors Against Alleged Violation Of NCLT Directives
The National Company Law Appellate Tribunal ('NCLAT'), Chennai bench comprising Justice Sharad Kumar Sharma and Jatindranath Swain (Technical Member) dismissed the appeals brought by four investors since the Adjudicating Authority has not made any final decision on any significant rights against the investors and instead has merely requested them to file an affidavit to support their...
The National Company Law Appellate Tribunal ('NCLAT'), Chennai bench comprising Justice Sharad Kumar Sharma and Jatindranath Swain (Technical Member) dismissed the appeals brought by four investors since the Adjudicating Authority has not made any final decision on any significant rights against the investors and instead has merely requested them to file an affidavit to support their claims regarding the alleged violation of its directives.
The appeal was filed by the four investors namely MIH EdTech Investments (a subsidiary of Prosus NV), General Atlantic Singapore, Peak XV Partners Operations LLC, and Sofina investors (Appellants) against NCLT Bengaluru's Order where it declined to grant an injunction against Byju's for allegedly breaching its directives.
Background Facts:
The investors of Byju's had filed a petition with the Adjudicating Authority alleging oppression and mismanagement by Byju's. The investors sought a declaration that the founder and CEO, Byju Raveendran, along with the current company management, are unfit to lead the company and should be removed from their positions.
On 27.02.2024, NCLT Bengaluru directed Byju's not to allocate shares to investors in the rights issue without increasing its authorized share capital. Additionally, the company was instructed to place the rights issue proceeds in an escrow account to protect investor rights.
Byju's investors argued that the company failed to deposit the funds received from a rights issue into an escrow account before 27.02.2024. They also claimed that Byju's allocated shares to participants of the rights issue, disregarding the tribunal's order to maintain the existing shareholding structure. These allegations were denied by Byju's asserting that all actions were taken in accordance with the law.
On 23.04.2024, NCLT Bengaluru taking note of the petition initially considered ordering Byju's to file an affidavit, however, it refrained because the investors had not submitted any application. The Tribunal directed the investors to file either an application or an affidavit within a week to formalize their claims. Byju's legal team indicated they would reply to the said affidavit within two weeks after the filing of the application or an affidavit.
Presently, the four investors namely MIH EdTech Investments (a subsidiary of Prosus NV), General Atlantic Singapore, Peak XV Partners Operations LLC, and Sofina investors have filed an appeal against NCLT Bengaluru's Order dated 23.04.2024 wherein the investors were directed to file an affidavit to substantiate their contentions concerning the violation of the interim order dated 27.02.2024.
Observations of NCLAT:
NCLAT Chennai dismissed the appeals brought by investors against Byju's for purportedly breaching directives.
It observed that the Adjudicating Authority has directed the investors to file an affidavit to better appreciate and substantiate the contentions in relation to the violation of the interim order dated 27.02.2024 and its effect as to whether at all there has been a violation of the impugned order.
The Appellate Tribunal noted that the investors are yet to file an affidavit. Further, they have filed the Contempt Petition on 18.04.2024, which is still pending before the Tribunal for review on its merits, according to the law.
The NCLAT noted that the Adjudicating Authority has not made any final decision on any significant rights against the investors. Instead, the Tribunal has merely requested the investors to file an affidavit to support their claims of an alleged violation of the interim order dated 27.02.2024. Therefore, the Appeal lacks merit and cannot be sustained, as it does not affect the rights of the parties.
Therefore, the bench held:
“As an appellate court, we cannot intervene in matters that are yet to mature in NCLT. We cannot issues orders on matter that is yet to be decided by NCLT. We cannot substitute the actions of NCLT."
Therefore, the NCLAT held that since a contempt petition had already been filed, it could not allow the investors to challenge the said Order. It observed that NCLT Bengaluru correctly instructed the appellant to submit an affidavit to support his claims of the interim order violation dated 27.02.2024.
Case Title: MIH Edtech Investments and Ors. vs. Think and Learn Pvt Ltd
Case No.: Company Appeal (AT) (CH) No.24/2024 (IA No.420/2024) (IA No.422/2024) (IA No.421/2024)
Counsel for Appellants: Shankh Sengupta and Tine Abraham, Advocates from Trilegal.
Counsel for Respondents: Manmeet Singh and Sairam Subramanian, Advocates from Saraf and Partners